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BMO Financial Group Reports Third Quarter 2020 Results

REPORT TO SHAREHOLDERS

Financial Results Highlights

Third Quarter 2020 Compared With Third Quarter 2019:

Net income of $1,232 million, compared with $1,557 million; adjusted net income1 of $1,259 million, compared with $1,582 million

Reported EPS2 of $1.81, compared with $2.34; adjusted EPS1,2 of $1.85, compared with $2.38

Revenue, net of CCPB3, of $6,000 million, up 4%

Provision for credit losses (PCL) of $1,054 million, compared with $306 million; current quarter includes PCL on performing loans of $608 million

ROE of 9.4%, compared with 13.2%; adjusted ROE1 of 9.6%, compared with 13.5%

Common Equity Tier 1 Ratio of 11.6%

Dividend of $1.06, unchanged from the prior quarter; up 3% from the prior year

Year-to-Date 2020 Compared With Year-to-Date 2019:

Net income of $3,513 million, compared with $4,564 million; adjusted net income1 of $3,591 million, compared with $4,642 million

Reported EPS2 of $5.18, compared with $6.88; adjusted EPS1,2 of $5.30, compared with $7.00

Revenue, net of CCPB3, of $17,492 million, up 3%

Provision for credit losses of $2,521 million, compared with $619 million, including year-to-date PCL on performing loans of $1,338 million

ROE of 9.3%, compared with 13.5%; adjusted ROE1 of 9.5%, compared with 13.7%

Toronto, August 25, 2020 – For the third quarter ended July 31, 2020, BMO Financial Group recorded net income of $1,232 million or $1.81 per share

on a reported basis, and net income of $1,259 million or $1.85 per share on an adjusted basis.

“For the third quarter, we delivered very good results in a fluid environment, demonstrating the continued strength and resiliency of our diversified

business model. We produced adjusted earnings per share of $1.85, strong pre-provision pre-tax earnings(1) of $2.6 billion, up 12% year-over-year, and

provided prudently for loan losses and demonstrated capital strength,” said Darryl White, Chief Executive Officer, BMO Financial Group.

“We entered the COVID-19 pandemic with momentum and in a position of strength and we have served our communities with consistent, safe and

uninterrupted access to banking services and personalized financial advice. While the pandemic continues to have a serious disruptive impact causing

lingering uncertainty and hardship for many, we are committed to standing by our customers and employees as we move into the next phase of the

economic recovery.

“This quarter, we continued to deliver on our commitment to expense management, a critical and appropriate lever in the current environment.

Expenses declined 2% from the prior quarter and year-over-year. Operating leverage for the quarter was 5.3% and year-to-date operating leverage

was strong at 2.9%.

“We are moving forward with a strong foundation and good operating momentum, and are well positioned to withstand both economic headwinds

and recovery. We will continue to provide unwavering support to our customers while delivering increased shareholder value through efficiency,

discipline and a strong focus on our strategic goals,” concluded Mr. White.

(1) Results and measures in this document are presented on a GAAP basis. They are also presented on an adjusted basis that excludes the impact of certain items. Adjusted results and measures are non-GAAP

and are detailed for all reported periods in the Non-GAAP Measures section, where such non-GAAP measures and their closest GAAP counterparts are disclosed.

(2) All Earnings per Share (EPS) measures in this document refer to diluted EPS, unless specified otherwise. EPS is calculated using net income after deducting total dividends on preferred shares and distributions

payable on other equity instruments.

(3) On a basis that nets insurance claims, commissions and changes in policy benefit liabilities (CCPB) against insurance revenue.

Note: All ratios and percentage changes in this document are based on unrounded numbers.

1 BMO Financial Group Third Quarter Report 2020

While COVID-19 continues to have an impact on the bank’s earnings in the current quarter, the bank’s operational performance remains good.

Reported net income of $1,232 million and adjusted net income of $1,259 million were impacted by higher provisions for credit losses, which

increased $748 million pre-tax, or $550 million after tax. Revenue increased in BMO Capital Markets, BMO Wealth Management and U.S. P&C, partially

offset by a decrease in Canadian P&C and Corporate Services. We maintained a disciplined approach to expense management, with adjusted expenses

decreasing 2% year-over-year. Overall results demonstrated the resiliency of our diversified earnings platform in a challenging environment.

Return on equity (ROE) was 9.4%, compared with 13.2% in the prior year, and adjusted ROE was 9.6%, compared with 13.5% in the prior year. Return

on tangible common equity (ROTCE) and adjusted ROTCE were both 11.1% in the current quarter, compared with 15.8% on both a reported and an

adjusted basis in the prior year.

Concurrent with the release of results, BMO announced a fourth quarter 2020 dividend of $1.06 per common share, unchanged from the prior quarter

and up $0.03 per share or 3% from the prior year. The quarterly dividend of $1.06 per common share is equivalent to an annual dividend of $4.24 per

common share.

The extent to which the COVID-19 pandemic impacts our business, results of operations, reputation and financial performance and condition, including

our regulatory capital and liquidity ratios, and credit ratings, as well as its impact on our customers, competitors and trading exposures, and the

potential for loss from higher credit, counterparty and mark-to-market losses, will depend on future developments, which are highly uncertain and

cannot be predicted, including the scope, severity and duration of the pandemic and actions taken by governmental and regulatory authorities, which

could vary by country, and other third parties in response to the pandemic. The COVID-19 pandemic may also impact our ability to achieve, or the

timing to achieve, certain previously announced targets, goals and objectives. Please refer to the Impact of COVID-19 and Risk Management sections.

Our complete Third Quarter 2020 Report to Shareholders, including our unaudited interim consolidated financial statements for the period

ended July 31, 2020, is available online at www.bmo.com/investorrelations and at www.sedar.com.

Third Quarter Operating Segment Overview Canadian P&C Reported and adjusted net income were $320 million, compared with reported net income of $650 million in the prior year, and adjusted net income

of $651 million. Adjusted net income excludes the amortization of acquisition-related intangible assets. Net income was lower due to higher provisions

for credit losses and lower revenue.

During the quarter, we were named the Best Commercial Bank in Canada by World Finance magazine for the sixth consecutive year, recognized for

our achievements and innovations in the global banking industry. In addition, we launched enhancements to our Indigenous Personal Banking Program,

including 12 months free banking with a Performance Plan Chequing Account for new customers, preferred rates on a wide range of mortgage options

and a BMO CashBack Mastercard with no annual fee.

U.S. P&C Reported net income was $263 million, compared with $368 million in the prior year, and adjusted net income was $273 million, compared with

$379 million. Adjusted net income excludes the amortization of acquisition-related intangible assets.

Reported net income was US$192 million, compared with US$278 million in the prior year, and adjusted net income was US$199 million,

compared with US$286 million, primarily due to higher provisions for credit losses, partially offset by lower expenses.

During the quarter, we were among eight select U.S. banks chosen to offer mobile-first chequing accounts managed via Google Pay, launching

in 2021. This collaboration is an acknowledgement of our proven ability to deliver innovative and customer-centric digital financial services.

BMO Wealth Management Reported net income was $341 million, an increase of $91 million or 37% from the prior year, and adjusted net income was $349 million, an increase

of $91 million or 35%. Adjusted net income excludes the amortization of acquisition-related intangible assets. Traditional Wealth reported net income

was $271 million, an increase of $45 million or 20%, and adjusted net income was $279 million, an increase of $45 million or 19%, primarily driven by

lower expenses and higher revenue, partially offset by higher provisions for credit losses. Insurance net income was $70 million, an increase of

$46 million, primarily due to higher revenue.

BMO Private Banking was named Best Private Bank in Canada by World Finance magazine for the tenth consecutive year, a recognition of our

client-centric approach and ability to understand and adapt to evolving trends.

BMO Capital Markets Reported net income was $426 million, an increase of $112 million or 36% from the prior year, and adjusted net income was $435 million, an increase

of $116 million or 36%. Adjusted net income excludes the amortization of acquisition-related intangible assets and acquisition integration costs. Strong

revenue performance was partially offset by higher provisions for credit losses and higher expenses.

We continue to provide innovative solutions for our clients during the pandemic. In the current quarter, we acted as joint bookrunner on a

$625 million senior secured notes offering to support a leveraged buyout of Radio Systems Corporation by a fund managed by Clayton, Dubilier & Rice

(CD&R), joint lead arranger and joint bookrunner on the concurrent syndication of a $100 million asset-based lending revolver, and as financial advisor

to CD&R on the transaction.

http://www.sedar.com/

BMO Financial Group Third Quarter Report 2020 2

Corporate Services Reported and adjusted net loss were $118 million, compared with a reported and adjusted net loss of $25 million in the prior year. Results decreased,

primarily due to lower treasury-related revenue and higher expenses driven by the impact of a gain on the sale of an office building in the prior year.

Adjusted results in this Third Quarter Operating Segment Overview section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-

GAAP Measures section.

Capital BMO’s Common Equity Tier 1 (CET1) Ratio was 11.6% as at July 31, 2020. The CET1 Ratio increased from 11.0% at the end of the second quarter driven

by retained earnings growth, lower source currency risk-weighted assets, primarily from a decline in commercial lending and a reduction in the credit

valuation adjustments charge, the adjustment for transitional arrangements for expected credit loss provisioning, and other net positive impacts.

Provision for Credit Losses Total provision for credit losses was $1,054 million, an increase of $748 million from the prior year, with the year-over-year change due to the impact

of COVID-19. The total provision for credit losses ratio was 89 basis points, compared with 28 basis points in the prior year. The provision for credit

losses on impaired loans was $446 million, an increase of $203 million from the prior year, due to higher provisions in all businesses. The provision for

credit losses on impaired loans ratio was 38 basis points, compared with 22 basis points in the prior year. There was a $608 million provision for credit

losses on performing loans in the current quarter, compared with a $63 million provision for credit losses on performing loans in the prior year. The

$608 million provision for credit losses on performing loans in the current quarter, reflects the impact of the extraordinary and highly uncertain

environment on credit conditions, the economy and scenario weights. Please refer to the Accounting Policies and Critical Accounting Estimates section

and Note 3 in our unaudited interim consolidated financial statements for further information on the allowance for credit losses as at July 31, 2020.

Caution The foregoing sections contain forward-looking statements. Please refer to the Caution Regarding Forward-Looking Statements.

Regulatory Filings Our continuous disclosure materials, including our interim filings, annual Management’s Discussion and Analysis and audited annual consolidated

financial statements, Annual Information Form and Notice of Annual Meeting of Shareholders and Proxy Circular, are available on our website at

www.bmo.com/investorrelations, on the Canadian Securities Administrators’ website at www.sedar.com, and on the EDGAR section of the

U.S. Securities and Exchange Commission’s website at www.sec.gov.

Bank of Montreal uses a unified branding approach that links all of the organization’s member companies. Bank of Montreal, together with its subsidiaries, is known as BMO Financial Group. As such, in this document, the names BMO and BMO Financial Group mean Bank of Montreal, together with its subsidiaries.


Management’s Discussion and Analysis

Management’s Discussion and Analysis (MD&A) commentary is as at August 25, 2020. The material that precedes this section comprises part of this

MD&A. The MD&A should be read in conjunction with the unaudited interim consolidated financial statements for the period ended July 31, 2020,

included in this document, as well as the audited consolidated financial statements for the year ended October 31, 2019, and the MD&A for fiscal 2019,

contained in our 2019 Annual Report.

BMO’s 2019 Annual Report includes a comprehensive discussion of our businesses, strategies and objectives, and can be accessed on our website

at www.bmo.com/investorrelations. Readers are also encouraged to visit the site to view other quarterly financial information.

Table of Contents

4 Caution Regarding Forward-Looking Statements 30 Balance Sheet

5 Economic Review and Outlook 31 Transactions with Related Parties

6 Financial Highlights 31 Select Financial Instruments and Off-Balance Sheet Arrangements

7 Non-GAAP Measures 31 Accounting Policies and Critical Accounting Estimates

8 Foreign Exchange 31 Allowance for Credit Losses

8 Impact of COVID-19 34 Changes in Accounting Policies

10 Net Income 34 Future Changes in Accounting Policies

10 Revenue 34 Other Regulatory Developments

12 Provision for Credit Losses 35 Risk Management

13 Impaired Loans 35 Top and Emerging Risks that May Affect Future Results

13 Insurance Claims, Commissions and Changes in Policy Benefit Liabilities 36 Market Risk

13 Non-Interest Expense 38 Liquidity and Funding Risk

14 Income Taxes 42 Credit Rating

15 Capital Management 45 European Exposures

19 Review of Operating Groups’ Performance 46 Interim Consolidated Financial Statements

19 Personal and Commercial Banking (P&C) 46 Consolidated Statement of Income

20 Canadian Personal and Commercial Banking (Canadian P&C) 47 Consolidated Statement of Comprehensive Income

22 U.S. Personal and Commercial Banking (U.S. P&C) 48 Consolidated Balance Sheet

24 BMO Wealth Management 49 Consolidated Statement of Changes in Equity

26 BMO Capital Markets 50 Consolidated Statement of Cash Flows

28 Corporate Services 51 Notes to Consolidated Financial Statements

29 Summary Quarterly Earnings Trends 71 Investor and Media Information

Bank of Montreal's management, under the supervision of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness,

as at July 31, 2020, of Bank of Montreal's disclosure controls and procedures (as defined in the rules of the U.S. Securities and Exchange Commission

and the Canadian Securities Administrators) and has concluded that such disclosure controls and procedures are effective.

There were no changes in our internal control over financial reporting during the quarter ended July 31, 2020, which materially affected, or are

reasonably likely to materially affect, our internal control over financial reporting.

Because of inherent limitations, disclosure controls and procedures and internal control over financial reporting can provide only reasonable

assurance and may not prevent or detect misstatements.

As in prior quarters, Bank of Montreal's Audit and Conduct Review Committee reviewed this document and Bank of Montreal’s Board of Directors

approved the document prior to its release.


Caution Regarding Forward-Looking Statements Bank of Montreal’s public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in

other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the “safe

harbor” provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian

securities legislation. Forward-looking statements in this document may include, but are not limited to, statements with respect to our objectives and priorities for fiscal 2020 and

beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, the regulatory environment in which we operate and the results of or

outlook for our operations or for the Canadian, U.S. and international economies, our response to the COVID-19 pandemic and its expected impact on our business, operations, earnings,

results and financial performance and condition, including our regulatory capital and liquidity ratios and credit ratings, as well as its impact on our customers, competitors, reputation

and trading exposures, and the potential for loss from higher credit, counterparty and mark-to-market losses, and include statements of our management. Forward-looking statements

are typically identified by words such as “will”, “would”, “should”, “believe”, “expect”, “anticipate”, “project”, “intend”, “estimate”, “plan”, “goal”, “target”, “may” and “could.”

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, both general and specific in nature. There is

significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct, and that actual results may differ materially

from such predictions, forecasts, conclusions or projections. The uncertainty created by the COVID-19 pandemic has heightened this risk given the increased challenge in making

assumptions, predictions, forecasts, conclusions or projections. We caution readers of this document not to place undue reliance on our forward-looking statements, as a number of

factors – many of which are beyond our control and the effects of which can be difficult to predict – could cause actual future results, conditions, actions or events to differ materially

from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the

countries in which we operate; the severity, duration and spread of the COVID-19 pandemic, its impact on local, national or international economies and its heightening of certain risks

that may affect our future results; the possible impact on our business and operations of outbreaks of disease or illness that affect local, national or international economies; the

Canadian housing market and consumer leverage; weak, volatile or illiquid capital and/or credit markets; interest rate and currency value fluctuations; changes in monetary, fiscal, or

economic policy and tax legislation and interpretation; the level of competition in the geographic and business areas in which we operate; changes in laws or in supervisory

expectations or requirements, including capital, interest rate and liquidity requirements and guidance, and the effect of such changes on funding costs; judicial or regulatory

proceedings; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; failure of third parties to comply with their obligations to

us; our ability to execute our strategic plans and to complete and integrate acquisitions, including obtaining regulatory approvals; critical accounting estimates and the effect of

changes to accounting standards, rules and interpretations on these estimates; operational and infrastructure risks, including with respect to reliance on third parties; changes to our

credit ratings; political conditions, including changes relating to or affecting economic or trade matters; global capital markets activities; the possible effects on our business of war or

terrorist activities; natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply; technological changes; information, privacy

and cyber security, including the threat of data breaches, hacking, identity theft and corporate espionage, as well as the possibility of denial of service resulting from efforts targeted at

causing system failure and service disruption; and our ability to anticipate and effectively manage risks arising from all of the foregoing factors.

We caution that the foregoing list is not exhaustive of all possible factors. Other factors and risks could adversely affect our results. For more information, please refer to the

discussion in the Risks That May Affect Future Results section, and the sections related to credit and counterparty, market, insurance, liquidity and funding, operational, legal and

regulatory, business, strategic, environmental and social, and reputation risk, in the Enterprise-Wide Risk Management section that begins on page 68 of BMO’s 2019 Annual Report,

and the Risk Management section on page 35 in this document, all of which outline certain key factors and risks that may affect our future results. Investors and others should carefully

consider these factors and risks, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. We do not undertake to update any

forward-looking statements, whether written or oral, that may be made from time to time by the organization or on its behalf, except as required by law.

The forward-looking information contained in this document is presented for the purpose of assisting our shareholders in understanding our financial position as at and for the

periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes.

Material economic assumptions underlying the forward-looking statements contained in this document are set out in the Economic Developments and Outlook section on page 18

of BMO’s 2019 Annual Report and updated in the Economic Review and Outlook section set forth in this document, as well as in the Allowance for Credit Losses section set forth in this

document. Assumptions about the performance of the Canadian and U.S. economies, as well as overall market conditions and their combined effect on our business, are material

factors we consider when determining our strategic priorities, objectives and expectations for our business. In determining our expectations for economic growth, we primarily consider

historical economic data, past relationships between economic and financial variables, changes in government policies, and the risks to the domestic and global economy. Please refer

to the Economic Review and Outlook and the Allowance for Credit Losses sections.


Economic Review and Outlook Like most countries, Canada’s economy contracted sharply in the first half of 2020, due to business closures and containment measures required to

suppress the outbreak of COVID-19. However, the subsequent decline in virus cases and reopening of non-essential businesses, as well as a partial

rebound in oil prices, have led to the early stages of a recovery in activity and employment in recent months. The recovery is expected to gather pace

in the second half of the year due to the release of pent-up demand and substantial government policy-support measures. Still, the severity of the

downturn and resulting permanent loss of some businesses and jobs, as well as caution on the part of consumers in the absence of a vaccine, suggest

the economy is unlikely to fully return to pre-virus levels until the end of 2021. After slowing to a 1.7% rate in 2019, real GDP is estimated to

contract 6.0% in 2020, before rebounding 6.0% in 2021. The unemployment rate, which jumped to a postwar high of 13.7% during the lockdowns, fell

to 10.9% in July 2020, and is projected to average 8.0% in 2021. The elevated jobless rate is expected to keep inflation low, while encouraging the

Bank of Canada to hold the overnight policy rate near zero until at least 2023. The Canadian dollar is projected to strengthen modestly in the year

ahead amid firmer resource prices and less safe-haven demand for U.S. dollars as the global economy recovers. Industry-wide consumer credit

balances have declined due to lower consumer spending and significant government income-support measures. By contrast, residential mortgage

balances have risen in response to low mortgage rates and a rebound in housing demand, with added support from payment deferrals. Industry-wide

business credit growth is anticipated to moderate in response to weaker business investment this year.

After a severe contraction in the first half of the year, the U.S. economy and employment recovered strongly after most of the lockdowns were

lifted in May 2020. However, a recent resurgence in virus cases has slowed the recovery in several states. After growing 2.2% in 2019, the U.S.

economy is currently expected to contract 5.0% in 2020, before rebounding 4.0% in 2021. The recovery has been supported by unprecedented fiscal

policy support. After spiking to 14.7% in April 2020, the unemployment rate fell to 10.2% in July 2020, and is projected to average 7.0% in 2021. The

Federal Reserve is expected to keep policy rates close to zero until at least 2023, to sustain the recovery and return inflation to the 2% target. Reduced

consumer spending is likely to slow industry-wide consumer credit growth this year, while demand for residential mortgages will likely moderate,

despite a recent rebound in housing markets. Declining business investment is anticipated to reduce industry-wide commercial loan growth this year.

The unknown path of the coronavirus pandemic will subject the economic outlook to a high degree of uncertainty and risk until a vaccine or an

effective treatment is available and is widely distributed. Specifically, the possibility of a second wave of the pandemic in the winter could lead to

renewed widespread shutdowns of nonessential business activity, potentially leading to another economic contraction.

This Economic Review and Outlook section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.


Financial Highlights (Canadian $ in millions, except as noted) Q3-2020 Q2-2020 Q3-2019 YTD-2020 YTD-2019

Summary Income Statement Net interest income (1) 3,535 3,518 3,217 10,441 9,524

Non-interest revenue 3,654 1,746 3,449 8,759 9,872

Revenue 7,189 5,264 6,666 19,200 19,396

Insurance claims, commissions and changes in policy benefit liabilities (CCPB) 1,189 (197) 887 1,708 2,374

Revenue, net of CCPB 6,000 5,461 5,779 17,492 17,022

Provision for credit losses on impaired loans 446 413 243 1,183 520

Provision for credit losses on performing loans 608 705 63 1,338 99

Total provision for credit losses 1,054 1,118 306 2,521 619

Non-interest expense (1) 3,444 3,516 3,491 10,629 10,643

Provision for income taxes 270 138 425 829 1,196

Net income attributable to equity holders of the bank 1,232 689 1,557 3,513 4,564

Adjusted net income 1,259 715 1,582 3,591 4,642

Common Share Data ($, except as noted) Earnings per share 1.81 1.00 2.34 5.18 6.88

Adjusted earnings per share 1.85 1.04 2.38 5.30 7.00

Earnings per share growth (%) (22.8) (56.0) 1.0 (24.7) 22.9

Adjusted earnings per share growth (%) (22.3) (55.0) 0.8 (24.3) 4.9

Dividends declared per share 1.06 1.06 1.03 3.18 3.03

Book value per share 76.60 77.99 70.88 76.60 70.88

Closing share price 73.28 70.77 98.80 73.28 98.80

Number of common shares outstanding (in millions)

End of period 642.8 639.6 639.0 642.8 639.0

Average diluted 641.7 640.2 640.4 640.9 640.4

Total market value of common shares ($ billions) 47.1 45.3 63.1 47.1 63.1

Dividend yield (%) 5.8 6.0 4.2 5.8 4.1

Dividend payout ratio (%) 58.7 106.4 43.9 61.4 43.9

Adjusted dividend payout ratio (%) 57.3 102.2 43.2 59.9 43.2

Financial Measures and Ratios (%) Return on equity 9.4 5.3 13.2 9.3 13.5

Adjusted return on equity 9.6 5.5 13.5 9.5 13.7

Return on tangible common equity 11.1 6.4 15.8 11.0 16.2

Adjusted return on tangible common equity 11.1 6.4 15.8 11.0 16.3

Net income growth (20.9) (53.9) 1.3 (23.0) 21.5

Adjusted net income growth (20.4) (53.0) 1.1 (22.6) 4.3

Revenue growth 7.8 (15.3) 15.1 (1.0) 14.0

Revenue growth, net of CCPB 3.8 (3.4) 4.6 2.8 6.1

Non-interest expense growth (1.4) (2.2) 3.9 (0.1) 3.5

Adjusted non-interest expense growth (1.5) (2.2) 4.1 (0.1) 6.2

Efficiency ratio, net of CCPB 57.4 64.4 60.4 60.8 62.5

Adjusted efficiency ratio, net of CCPB 56.8 63.8 59.9 60.2 61.9

Operating leverage, net of CCPB 5.2 (1.2) 0.7 2.9 2.6

Adjusted operating leverage, net of CCPB 5.3 (1.2) 0.5 2.9 (0.1)

Net interest margin on average earning assets 1.59 1.70 1.67 1.65 1.69

Effective tax rate 18.0 16.6 21.5 19.1 20.8

Adjusted effective tax rate 18.2 16.7 21.5 19.2 20.8

Total PCL-to-average net loans and acceptances (annualized) 0.89 0.94 0.28 0.72 0.19

PCL on impaired loans-to-average net loans and acceptances (annualized) 0.38 0.35 0.22 0.34 0.16

Balance Sheet (as at, $ millions, except as noted) Assets 973,508 987,067 839,180 973,508 839,180

Gross loans and acceptances 466,611 494,192 444,390 466,611 444,390

Net loans and acceptances 463,360 491,416 442,588 463,360 442,588

Deposits 660,600 653,710 553,383 660,600 553,383

Common shareholders’ equity 49,239 49,886 45,295 49,239 45,295

Cash and securities-to-total assets ratio (%) 32.1 29.7 28.3 32.1 28.3

Capital ratios (%) CET1 Ratio 11.6 11.0 11.4 11.6 11.4

Tier 1 Capital Ratio 13.1 12.5 13.0 13.1 13.0

Total Capital Ratio 15.8 14.7 15.3 15.8 15.3

Leverage Ratio 4.7 4.6 4.3 4.7 4.3

Foreign Exchange Rates ($) As at Canadian/U.S. dollar 1.3386 1.3924 1.3198 1.3386 1.3198

Average Canadian/U.S. dollar 1.3584 1.3811 1.3270 1.3517 1.3307

(1) Effective the first quarter of 2020, the bank adopted IFRS 16, Leases (IFRS 16), recognizing the cumulative effect of adoption in opening retained earnings with no changes to prior periods. Under IFRS 16, the

bank as lessee is required to recognize a right-of-use asset and a corresponding lease liability for most leases. For the three months ended July 31, 2020, we recognized $91 million of depreciation on the

right-of-use assets recorded in non-interest expense and $13 million of interest on the lease liability recorded in interest expense. For the nine months ended July 31, 2020, we recognized $270 million and

$40 million, respectively. Refer to the Changes in Accounting Policies section on page 34 for further details.

Adjusted results are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures section.


Non-GAAP Measures Results and measures in this document are presented on a GAAP basis. Unless otherwise indicated, all amounts are in Canadian dollars and have been

derived from financial statements prepared in accordance with International Financial Reporting Standards (IFRS). References to GAAP mean IFRS. They

are also presented on an adjusted basis that excludes the impact of certain items, as set out in the table below. Results and measures that exclude the

impact of Canadian/U.S. dollar exchange rate movements on our U.S. segment are non-GAAP measures. Please refer to the Foreign Exchange section

on page 8 for a discussion of the effects of changes in exchange rates on our results. Pre-provision pre-tax earnings (PPPT) is a non-GAAP measure,

and is calculated as the difference between revenue, net of insurance claims, commissions and changes in policy benefit liabilities (CCPB), and non-

interest expense. Management assesses performance on a reported basis and on an adjusted basis, and considers both to be useful in assessing

underlying ongoing business performance. Presenting results on both bases provides readers with a better understanding of how management

assesses results. It also permits readers to assess the impact of certain specified items on results for the periods presented, and to better assess results

excluding those items that may not be reflective of ongoing results. As such, the presentation may facilitate readers’ analysis of trends. Except as

otherwise noted, management’s discussion of changes in reported results in this document applies equally to changes in the corresponding adjusted

results. Adjusted results and measures are non-GAAP and as such do not have standardized meanings under GAAP. They are unlikely to be comparable

to similar measures presented by other companies and should not be viewed in isolation from, or as a substitute for, GAAP results.

Non-GAAP Measures (Canadian $ in millions, except as noted) Q3-2020 Q2-2020 Q3-2019 YTD-2020 YTD-2019

Reported Results

Revenue 7,189 5,264 6,666 19,200 19,396

Insurance claims, commissions and changes in policy benefit liabilities (CCPB) (1,189) 197 (887) (1,708) (2,374)


Total provision for credit losses (1,054) (1,118) (306) (2,521) (619)

Non-interest expense (3,444) (3,516) (3,491) (10,629) (10,643)

Income before income taxes 1,502 827 1,982 4,342 5,760

Provision for income taxes (270) (138) (425) (829) (1,196)

Net income 1,232 689 1,557 3,513 4,564

EPS ($) 1.81 1.00 2.34 5.18 6.88

Adjusting Items (Pre-tax) (1) Acquisition integration costs (2) (5) (3) (3) (11) (11)

Amortization of acquisition-related intangible assets (3) (32) (30) (29) (91) (90)

Adjusting items included in reported pre-tax income (37) (33) (32) (102) (101)

Adjusting Items (After tax) (1) Acquisition integration costs (2) (4) (2) (2) (8) (8)

Amortization of acquisition-related intangible assets (3) (23) (24) (23) (70) (70)

Adjusting items included in reported net income after tax (27) (26) (25) (78) (78)

Impact on EPS ($) (0.04) (0.04) (0.04) (0.12) (0.12)

Adjusted Results Revenue 7,189 5,264 6,666 19,200 19,396

Insurance claims, commissions and changes in policy benefit liabilities (CCPB) (1,189) 197 (887) (1,708) (2,374)


Total provision for credit losses (1,054) (1,118) (306) (2,521) (619)

Non-interest expense (3,407) (3,483) (3,459) (10,527) (10,542)

Income before income taxes 1,539 860 2,014 4,444 5,861

Provision for income taxes (280) (145) (432) (853) (1,219)

Net income 1,259 715 1,582 3,591 4,642

EPS ($) 1.85 1.04 2.38 5.30 7.00

(1) Adjusting items are generally included in Corporate Services, with the exception of the amortization of acquisition-related intangible assets and certain acquisition integration costs, which are charged to the

operating groups.

(2) KGS–Alpha and Clearpool acquisition integration costs are reported in BMO Capital Markets. Acquisition integration costs are recorded in non-interest expense.

(3) These amounts were charged to the non-interest expense of the operating groups. Before-tax and after-tax amounts for each operating group are provided on pages 19, 20, 22, 24 and 26.

Adjusted results and measures in this table are non-GAAP amounts or non-GAAP measures.


Foreign Exchange The Canadian dollar equivalents of BMO’s U.S. results that are denominated in U.S. dollars increased relative to the third quarter of 2019 and on a

year-to-date basis, and decreased relative to the second quarter of 2020, due to changes in the U.S. dollar exchange rate. The table below indicates

the relevant average Canadian/U.S. dollar exchange rates and the impact of changes in those rates on our U.S. segment results. References in this

document to the impact of the U.S. dollar do not include U.S. dollar-denominated amounts recorded outside of BMO’s U.S. segment.

Changes in exchange rates will affect future results measured in Canadian dollars, and the impact on those results is a function of the periods in

which revenues, expenses and provisions for (recoveries of) credit losses arise.

Economically, our U.S. dollar income stream was unhedged to changes in foreign exchange rates during the current and prior year. We regularly

determine whether to enter into hedging transactions in order to mitigate the impact of foreign exchange rate movements on net income.

Refer to the Enterprise-Wide Capital Management section on page 59 of the 2019 Annual Report for a discussion of the impact that changes in

foreign exchange rates can have on our capital position. Changes in foreign exchange rates will also affect accumulated other comprehensive income,

primarily as a result of the translation of our investment in foreign operations.

This Foreign Exchange section contains forward-looking statements. Please refer to the Caution Regarding Forward-Looking Statements.

Effects of Changes in Exchange Rates on BMO’s U.S. Segment Reported and Adjusted Results Q3-2020 YTD-2020

(Canadian $ in millions, except as noted) vs. Q3-2019 vs. Q2-2020 vs. YTD-2019

Canadian/U.S. dollar exchange rate (average)

Current period 1.3584 1.3584 1.3517

Prior period 1.3270 1.3811 1.3307

Effects on U.S. segment reported results Increased (Decreased) net interest income 31 (24) 63

Increased (Decreased) non-interest revenue 19 (10) 32

Increased (Decreased) revenues 50 (34) 95

Decreased (Increased) provision for credit losses (2) 7 (5)

Decreased (Increased) expenses (33) 22 (64)

Decreased (Increased) income taxes (3) 1 (5)

Increased (Decreased) reported net income 12 (4) 21

Impact on earnings per share ($) 0.02 (0.01) 0.03

Effects on U.S. segment adjusted results Increased (Decreased) net interest income 31 (24) 63

Increased (Decreased) non-interest revenue 19 (10) 32

Increased (Decreased) revenues 50 (34) 95

Decreased (Increased) provision for credit losses (2) 7 (5)

Decreased (Increased) expenses (32) 22 (63)

Decreased (Increased) income taxes (4) 1 (5)

Increased (Decreased) adjusted net income 12 (4) 22

Impact on adjusted earnings per share ($) 0.02 (0.01) 0.03

Adjusted results in this table are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures section.

Impact of COVID-19 The COVID-19 pandemic continues to have a dramatic impact on the economy and society. Following the steepest and fastest recession recorded in

Canadian history, there are clear signs that the Canadian and global economies have begun the initial stages of recovery. The economic improvement

has been supported by unprecedented fiscal policy stimulus and record-low sovereign interest rates in Canada and the United States. However, with

some restrictions still in place, uneven success at containing the virus across geographies, borders still closed, and many Canadians reluctant to return

fully to normal activities, a complete recovery will likely take an extended period of time. For additional information, please refer to the Economic

Review and Outlook section.

We are closely monitoring developments around the spread of the virus and the safety of our employees and clients remains our top priority. We

are working closely with relevant public health authorities to monitor the situation and will continue to follow their guidance to make informed

decisions. Our branches and offices have incorporated added precautionary measures including enhanced cleaning protocols. Almost all of our branches

in Canada and the United States are open and we are maintaining full access to call centres and ATMs. Over 90% of our non-branch workforce

continues to work remotely. We continue to take steps to assess and mitigate internal control risks created by the shift in the way we work.

Given the pandemic’s impact on the global economy, there has been a corresponding negative impact on our financial results. In the current

quarter, we had good revenue performance in our market sensitive businesses. Revenues in our Canadian and U.S. P&C businesses were impacted by

the lower interest rate environment, reflecting the 150 basis points of interest rate cuts implemented by the Bank of Canada and the Federal Reserve

during the second quarter. Loan balances generally declined from elevated levels seen in the second quarter, which were largely driven by increased

client utilizations in our wholesale portfolios. Deposit growth continues to be strong. The provision for credit losses was $1,054 million in the third

quarter, down from the second quarter but still elevated. We maintained a disciplined approach to expense management, with adjusted expenses

decreasing 2% year-over-year, while absorbing incremental costs as a result of COVID-19, including a fixed daily allowance paid to a limited number of

essential employees required to continue to work onsite, cleaning costs and personal protective equipment costs to ensure the safety of our customers

and employees.

We continue to support our customers through this challenging environment, working closely with governments and agencies to implement

programs to reduce the financial hardship caused by COVID-19, including payment deferrals and lending facilities designed to help individuals and

businesses to withstand stress and recover.


The following table shows the uptake of payment deferral programs by geography and product type. Numbers are approximate and as at

July 31, 2020.

Payment Deferrals As at July 31, 2020 As at April 30, 2020 (1)

Number of accounts Outstanding balances* Number of accounts Outstanding balances*

Canada (2) (in thousands) (Canadian $ in billions) % of portfolio (in thousands) (Canadian $ in billions) % of portfolio

Mortgages (including amortizing HELOC) 52.3 17.25 14% 55.0 17.16 14%

Credit Cards 38.5 0.34 5% 37.3 0.33 5%

All other personal lending 84.8 2.37 7% 89.1 2.43 7%

Total Retail – Canada 175.6 19.96 12% 181.4 19.92 13%

Commercial Banking (number of clients) 7.2 9.40 11% 7.4 15.08 17%

United States (3) (US$ in billions) (US$ in billions)

Mortgages 1.5 0.45 8% 2.0 0.57 10%

Indirect Auto 8.0 0.21 4% 14.2 0.32 6%

All other personal lending 4.0 0.14 3% 5.2 0.15 3%

Total Retail – United States 13.5 0.80 5% 21.4 1.04 6%

Commercial Banking (number of clients) 1.4 0.90 1% 1.1 3.62 4%

* Outstanding balances for accounts/clients with payments deferred.

(1) Payment deferrals reflect as at balances at period end and minor recategorizations to align with Q3 2020 disclosures.

(2) In Canada mortgage deferrals were available for one to six months. Canadian personal mortgages exclude balances related to non-proprietary mortgages, consistent with an industry reporting definition

established by the Canadian Bankers Association; there were approximately $2 billion in balances outstanding related to non-proprietary mortgages in deferral in both periods. For other retail loans and cards,

deferral offer was one to six months until June 30, 2020, and one to three months beginning in July 2020. Commercial deferrals granted for three to six months.

(3) In the United States deferrals on consumer products were available for up to three months. Commercial deferrals granted for three months.

Payment deferral information in the table above represents deferrals outstanding as at July 31, 2020. Requests for payment deferrals have

declined significantly since peaking in the second quarter. In Canada, consumer payment deferrals were granted for up to six months. Balances at the

end of the third quarter were similar to the second quarter, as 25% of accounts or $4.4 billion in balances that matured during the quarter were offset

by growth of approximately $4.3 billion in outstanding balances for clients new to deferral. In the United States, consumer payment deferrals were

granted for up to three months and balances have declined since the second quarter. During the third quarter, there were expiries across portfolios. In

both Canada and the United States, we are seeing high rates of payment resumption among consumers whose payment deferral period has ended.

Commercial payment deferral balances have declined significantly since the second quarter in both Canada and the United States. In the United States,

the number of commercial clients on deferral increased, largely reflecting clients with smaller balances. Overall, the large majority of commercial

clients previously on deferral have resumed payments. Almost all of the consumer and commercial payment deferrals outstanding as at July 31, 2020

will expire in the fourth quarter.

We are participating in government offered programs in both Canada and the United States, supporting individuals and businesses facing economic

hardship due to the pandemic. In Canada, we facilitated $2.6 billion in funding for over 65,000 business banking accounts under the Canada Emergency

Business Account (CEBA) Program, for which the eligibility criteria was further expanded this quarter allowing us to help even more of our customers.

Under the program, we issue loans that are funded by the government. We determined these loans qualify for derecognition, as the risks and rewards

are transferred to the government, and therefore we do not recognize these loans on the Consolidated Balance Sheet. As part of the Government of

Canada’s Business Credit Availability Program (BCAP) we are also participating in the Business Development Bank of Canada (BDC), and Export

Development Canada (EDC) relief programs to help Canadian businesses of all sizes impacted by COVID-19 obtain needed financing. In Q3 2020, the

BDC financing program was expanded to support those medium-sized companies with revenues between $100 million and $500 million. In the

United States, we secured US$4.7 billion in funding for almost 22,000 borrowers under the SBA Paycheck Protection program. We have taken a

personal and relationship-based approach that considers the unique needs of each customer and leverages our long history and experience through

many economic cycles.

In addition to offering financial relief measures to our customers, we have donated to community relief efforts to the fight against COVID-19 on

both sides of the border. BMO Financial Group is the lead financial services donor to Sunnybrook’s CONCOR-1 efforts with a gift of $300,000. BMO has

been a sponsor of Kids Help Phone's Walk so Kids Can Talk for almost a decade. In response to COVID-19, the 19th annual Walk So Kids Can Talk

transformed into a new virtual fundraiser. The new virtual Never Dance Alone-a-thon, powered by BMO, took place across Canada on May 31, 2020, to

encourage fundraising and spread awareness about the importance of supporting young people through an especially distressing and uncertain time.

In the U.S., BMO Harris Bank partnered with the Chicago Bulls to turn surplus Bulls apparel into 10,000 face coverings to be donated to local non-profits.

Central banks around the world continue to provide accommodative policies and make available financing programs to support the smooth

functioning of the financial markets. Consistent with other banks, BMO raised deposits and secured funding through the Bank of Canada’s term repo

facility in Q2 2020, which will mature by Q2 2021. BMO also utilized certain other central bank programs in Q2 2020 to a modest degree. These other

central bank funding programs have since been fully repaid. BMO maintained a strong liquidity position in the third quarter. The bank experienced

strong customer deposit inflows in the third quarter, building on the momentum observed in the second quarter, while customer loans declined. For

additional information, please refer to the Liquidity and Funding Risk section.

The Office of the Superintendent of Financial Institutions (OSFI) continued to emphasize the usability of capital buffers, encouraging banks to

provide loans and financial services during times of economic stress. The modifications to capital requirements that OSFI announced in the second

quarter of 2020 remained in effect in the current quarter, key measures of which include the 1% Domestic Stability Buffer, reduction in the stressed

value-at-risk multipliers under market risk, treatment of certain loans subject to payment deferrals as performing loans, and transitional arrangements

for credit loss provisioning that are available under the Basel Framework. For additional information, please refer to the Capital Management section.

Despite concern related to heightened cyber threats and fraud activity through the crisis, the financial impact to BMO has been minimal, with only

negligible fraud losses due to our early detection and recovery efforts. BMO’s Financial Crimes Unit (FCU) remains fully engaged across a number of

security pillars.


Caution The extent to which the COVID-19 pandemic impacts our business, results of operations, reputation and financial performance and condition, including

our regulatory capital and liquidity ratios, and credit ratings, as well as its impact on our customers, competitors and trading exposures, and the

potential for loss from higher credit, counterparty and mark-to-market losses, will depend on future developments, which are highly uncertain and

cannot be predicted, including the scope, severity and duration of the pandemic and actions taken by governmental and regulatory authorities, which

could vary by country, and other third parties in response to the pandemic. The COVID-19 pandemic may also impact our ability to achieve, or the

timing to achieve, certain previously announced targets, goals and objectives. For additional information, please refer to the Risk Management section.

This Impact of COVID-19 section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Net Income Q3 2020 vs. Q3 2019 Reported net income was $1,232 million, compared with $1,557 million in the prior year, and adjusted net income was $1,259 million, compared with

$1,582 million. Adjusted net income excludes the amortization of acquisition-related intangible assets and acquisition integration costs in both periods.

Reported EPS was $1.81, compared with $2.34 in the prior year, and adjusted EPS was $1.85, compared with $2.38.

Adjusted results primarily reflect the impact of higher provisions for credit losses, which increased $748 million pre-tax or $550 million after tax,

partially offset by higher revenue and lower expenses. Adjusted net income increased in BMO Capital Markets and BMO Wealth Management, but was

more than offset by decreases in our P&C businesses, largely due to higher provisions for credit losses. Corporate Services recorded a higher adjusted

net loss from the prior year.

Q3 2020 vs. Q2 2020 Reported net income was $1,232 million, an increase of $543 million from the prior quarter, and adjusted net income was $1,259 million, an increase

of $544 million. Both reported EPS and adjusted EPS increased $0.81 from the prior quarter.

Adjusted results were driven by higher revenue, lower expenses and lower provisions for credit losses. Net income in BMO Capital Markets and

BMO Wealth Management increased, but was partially offset by a decrease in our P&C businesses and a higher net loss in Corporate Services. Results

included the impact of two more days in the current quarter.

Q3 YTD 2020 vs. Q3 YTD 2019 Reported net income was $3,513 million, compared with $4,564 million in the prior year. Adjusted net income was $3,591 million, compared with

$4,642 million. Reported EPS was $5.18, compared with $6.88 in the prior year, and adjusted EPS was $5.30, compared with $7.00.

Adjusted net income decreased, due to higher provisions for credit losses, which increased $1,902 million pre-tax or $1,399 million after tax,

partially offset by higher revenue. Decreases in adjusted net income were recorded across all operating groups, and Corporate Services recorded a

higher adjusted net loss.

Adjusted results in this Net Income section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section. See also

the Impact of COVID-19 and Risk Management sections.

Revenue (1)

Q3 2020 vs. Q3 2019 Revenue was $7,189 million, an increase of $523 million or 8% from the prior year, or 7% excluding the impact of the stronger U.S. dollar. On a basis

that nets insurance claims, commissions and changes in policy benefit liabilities (CCPB) against insurance revenue (net revenue), revenue increased

$221 million, or 4% from $5,779 million in the prior year, or 3% excluding the impact of the stronger U.S. dollar.

Revenue increased in BMO Capital Markets, due to higher trading revenue from strong client activity, in BMO Wealth Management, primarily due to

higher insurance revenue, and in U.S P&C. Revenue in Canadian P&C decreased due to lower non-interest revenue, with net interest income relatively

unchanged as higher balances were offset by lower margins. Corporate Services revenue decreased from the prior year, primarily due to lower

treasury-related revenue.

Net interest income was $3,535 million, an increase of $318 million or 10%, or 9% excluding the impact of the stronger U.S. dollar. On an

excluding trading basis, net interest income was $2,940 million, a decrease of $38 million or 1%, or 2% excluding the impact of the stronger

U.S. dollar, largely due to lower net interest income in Corporate Services, partially offset by modestly higher net interest income in our P&C

businesses, with higher balances more than offsetting the impact of lower margins, and higher net interest income in BMO Capital Markets.

Average earning assets were $884.5 billion, an increase of $121.2 billion or 16%, or 15% excluding the impact of the stronger U.S. dollar, due to

higher cash resources, loan growth, and higher securities. BMO’s overall net interest margin decreased 8 basis points from the prior year, primarily

driven by a higher volume of assets in Corporate Services and BMO Capital Markets, which has a lower spread than the bank, and lower margins in

Corporate Services, our P&C businesses and BMO Wealth Management, partially offset by higher trading net interest income. On an excluding trading

basis, net interest margin decreased 31 basis points, due to the drivers noted above.






Non-interest revenue, net of CCPB, was $2,465 million, compared with $2,562 million in the prior year. The decrease was primarily driven by lower

securities gains and decreases in trading, foreign exchange other than trading, and card fee revenue, partially offset by higher insurance and

underwriting and advisory fee revenue, as well as investments in associates and joint ventures. On an excluding trading basis, net of CCPB, non-

interest revenue was $2,397 million, compared with $2,447 million in the prior year.

Gross insurance revenue increased $332 million from the prior year, primarily due to a higher increase in the fair value of investments in the

current quarter from larger decreases in interest rates, compared with the prior year, and the impact of stronger equity markets in the current quarter.

These changes related to the fair value of investments were largely offset by changes in policy benefit liabilities, the impact of which is reflected in

CCPB, as discussed on page 13. We generally focus on analyzing revenue, net of CCPB, given the extent to which insurance revenue can vary and that

this variability is largely offset in CCPB.

Q3 2020 vs. Q2 2020 Revenue was $7,189 million, an increase of $1,925 million or 37% from the prior quarter. Revenue, net of CCPB, increased $539 million or 10% from

the prior quarter, or 11% excluding the impact of the weaker U.S. dollar.

Revenue increased in BMO Capital Markets, primarily due to higher trading revenue, and in BMO Wealth Management, largely due to higher

insurance revenue, the impact of a legal provision in the prior quarter and stronger global markets. U.S. P&C revenue decreased, primarily due to lower

deposit margins and non-interest revenue, partially offset by higher deposit balances, while Canadian P&C revenue was relatively unchanged.

Corporate Services revenue decreased from the prior quarter, due to lower treasury-related revenue. The current quarter included two more days.

Net interest income increased $17 million, relatively unchanged from the prior quarter, or 1% excluding the impact of the weaker U.S. dollar. On

an excluding trading basis, net interest income decreased $111 million or 4%, or 3% excluding the impact of the weaker U.S. dollar, largely due to

lower net interest income in Corporate Services and BMO Capital Markets, partially offset by higher net interest income in BMO Wealth Management

and Canadian P&C, with higher balances and the impact of two more days in the current quarter in Canadian P&C more than offsetting lower margins.

Average earning assets increased $40.6 billion or 5%, or 6% excluding the impact of the weaker U.S. dollar, primarily due to higher cash resources,

higher securities, loan growth, and higher securities borrowed or purchased under repurchase agreements. BMO’s overall net interest margin

decreased 11 basis points from the prior quarter, primarily due to a higher volume of assets in Corporate Services, which has a lower spread than the

bank, and lower margins in Corporate Services and our P&C businesses, partially offset by higher trading net interest income. On an excluding trading

basis, net interest margin decreased 17 basis points from the prior quarter, due to the drivers noted above.

Non-interest revenue, net of CCPB, was $2,465 million, an increase of $522 million or 27% from the prior quarter, or 28% excluding the weaker

U.S. dollar. The increase was primarily driven by higher trading, insurance and underwriting and advisory fee revenue, increased revenue from

securities gains and higher investment management and custodial fee revenue. On an excluding trading basis, net of CCPB, non-interest revenue

increased $237 million or 11%, or 12% excluding the impact of the weaker U.S. dollar.

Gross insurance revenue increased $1,487 million from the prior quarter, primarily due to an increase in the fair value of investments in the current

quarter from decreases in interest rates, compared with a decrease in the fair value of investments in the prior quarter from increases in interest rates,

higher annuity sales, and the impact of stronger equity markets in the current quarter. The increase in insurance revenue was largely offset by changes

in CCPB, as discussed on page 13.

Net interest income and non-interest revenue are detailed in the unaudited interim consolidated financial statements.

Q3 YTD 2020 vs. Q3 YTD 2019 Revenue was $19,200 million, compared with $19,396 million in the prior year. Revenue, net of CCPB was $17,492 million, an increase of $470 million

or 3% from the prior year, or 2% excluding the impact of the stronger U.S. dollar.

Revenue increased in BMO Capital Markets, primarily due to higher trading revenue, and in our P&C businesses, primarily due to growth in deposit

and loan balances, partially offset by lower margins and lower non-interest revenue. BMO Wealth Management net revenue decreased, primarily due

to lower insurance revenue. Corporate Services revenue also decreased from the prior year.

Net interest income was $10,441 million, an increase of $917 million or 10%, or 9% excluding the impact of the stronger U.S. dollar. On an

excluding trading basis, net interest income was $9,022 million, an increase of $336 million or 4%, or 3% excluding the impact of the stronger

U.S. dollar, largely due to higher net interest income in our P&C businesses, with higher balances more than offsetting lower margins, and BMO Capital

Markets, partially offset by lower net interest income in Corporate Services.

Average earning assets were $844.3 billion, an increase of $92.0 billion or 12%, due to loan growth, higher cash resources and higher securities.

BMO’s overall net interest margin decreased 4 basis points, primarily driven by a higher volume of assets in Corporate Services and BMO Capital

Markets, which has a lower spread than the bank, lower margin in Corporate Services, and lower margins in BMO Wealth Management and U.S. P&C,

which were impacted by the lower interest rate environment, partially offset by higher trading net interest income. On an excluding trading basis, net

interest margin decreased 19 basis points, due to the drivers noted above.

Non-interest revenue, net of CCPB, was $7,051 million, compared with $7,498 million in the prior year, primarily due to a decrease in trading non-

interest revenue, lower securities gains, and decreases in card fee revenue, foreign exchange other than trading and insurance revenue, partially offset

by higher lending revenue and underwriting and advisory fee revenue.

Net interest income and non-interest revenue are detailed in the unaudited interim consolidated financial statements.

Adjusted results in this Revenue section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.


Provision for Credit Losses Q3 2020 vs. Q3 2019 Total provision for credit losses was $1,054 million, an increase of $748 million from the prior year, with the year-over-year change due to the impact

of COVID-19. The total provision for credit losses ratio was 89 basis points, compared with 28 basis points in the prior year. The provision for credit

losses on impaired loans was $446 million, an increase of $203 million from $243 million in the prior year, due to higher provisions in all businesses.

The provision for credit losses on impaired loans ratio was 38 basis points, compared with 22 basis points in the prior year. There was a $608 million

provision for credit losses on performing loans in the current quarter, compared with a $63 million provision for credit losses on performing loans in

the prior year. The $608 million provision for credit losses on performing loans in the current quarter, reflects the impact of the extraordinary and

highly uncertain environment on credit conditions, the economy and scenario weights.

Q3 2020 vs. Q2 2020 Total provision for credit losses was $1,054 million, a decrease of $64 million from the prior quarter. The total provision for credit losses ratio

was 89 basis points, compared with 94 basis points in the prior quarter. The provision for credit losses on impaired loans increased $33 million,

primarily due to higher provisions in Canadian P&C. The provision for credit losses on impaired loans ratio was 38 basis points, compared with 35 basis

points in the prior quarter. There was a $608 million provision for credit losses on performing loans in the current quarter, compared with a

$705 million provision for credit losses on performing loans in the prior quarter, with the decrease primarily due to changes in the economic outlook,

reduced balances and the impact of model changes, largely offset by the impact of the uncertain environment on credit conditions and scenario

weights.

Q3 YTD 2020 vs. Q3 YTD 2019 Total provision for credit losses was $2,521 million, an increase of $1,902 million from the prior year. The total provision for credit losses ratio

was 72 basis points, compared with a low level of 19 basis points in the prior year. The provision for credit losses on impaired loans was

$1,183 million, an increase of $663 million from $520 million in the prior year, primarily due to higher provisions in U.S. P&C, partially as a result of

recoveries in the prior year, as well as higher provisions in Canadian P&C and BMO Capital Markets. The provision for credit losses on impaired loans

ratio was 34 basis points, compared with a low level of 16 basis points in the prior year. There was a $1,338 million provision for credit losses on

performing loans in the current year, compared with a provision of $99 million in the prior year. The significant year-to-date increase in the current

year, compared with the same period in the prior year, was due to the impact of COVID-19.

Provision for Credit Losses by Operating Group

Wealth BMO Capital Corporate (Canadian $ in millions) Canadian P&C U.S. P&C Total P&C Management Markets Services Total Bank

Q3-2020

Provision for (recovery of) credit losses on impaired loans 257 109 366 1 79 - 446 Provision for (recovery of) credit losses on performing loans 313 223 536 7 58 7 608 Total provision for (recovery of) credit losses 570 332 902 8 137 7 1,054 Q2-2020

Provision for (recovery of) credit losses on impaired loans 212 124 336 3 73 1 413

Provision for (recovery of) credit losses on performing loans 285 75 360 3 335 7 705

Total provision for (recovery of) credit losses 497 199 696 6 408 8 1,118

Q3-2019 Provision for (recovery of) credit losses on impaired loans 174 61 235 - 7 1 243

Provision for (recovery of) credit losses on performing loans 30 37 67 (2) 3 (5) 63

Total provision for (recovery of) credit losses 204 98 302 (2) 10 (4) 306

YTD-2020

Provision for (recovery of) credit losses on impaired loans 607 365 972 4 205 2 1,183 Provision for (recovery of) credit losses on performing loans 612 315 927 13 390 8 1,338 Total provision for (recovery of) credit losses 1,219 680 1,899 17 595 10 2,521 YTD-2019 Provision for (recovery of) credit losses on impaired loans 410 94 504 1 20 (5) 520

Provision for (recovery of) credit losses on performing loans 52 33 85 (1) 20 (5) 99

Total provision for (recovery of) credit losses 462 127 589 - 40 (10) 619

Provision for Credit Losses Performance Ratios Q3-2020 Q2-2020 Q3-2019 YTD-2020 YTD-2019

Total PCL-to-average net loans and acceptances (annualized) (%) 0.89 0.94 0.28 0.72 0.19

PCL on impaired loans-to-average net loans and acceptances (annualized) (%) 0.38 0.35 0.22 0.34 0.16


Impaired Loans Total gross impaired loans (GIL) were $4,413 million at the end of the current quarter, compared with $2,432 million in the prior year, with the

majority of the increase in impaired loans attributed to retail trade, oil and gas and service industries. GIL increased $768 million from $3,645 million in

the prior quarter.

Factors contributing to the change in GIL are outlined in the table below. Loans classified as impaired during the quarter totalled $1,760 million,

compared with $679 million in the prior year, and $1,396 million in the prior quarter.

Changes in Gross Impaired Loans (GIL) (1) and Acceptances (Canadian $ in millions, except as noted) Q3-2020 Q2-2020 Q3-2019 YTD-2020 YTD-2019

GIL, beginning of period 3,645 2,822 2,335 2,629 1,936

Classified as impaired during the period 1,760 1,396 679 3,987 1,887

Transferred to not impaired during the period (113) (110) (132) (424) (384)

Net repayments (409) (277) (232) (1,005) (581)

Amounts written-off (384) (262) (138) (773) (369)

Recoveries of loans and advances previously written-off - - - - -

Disposals of loans - (17) (57) (17) (57)

Foreign exchange and other movements (86) 93 (23) 16 -

GIL, end of period 4,413 3,645 2,432 4,413 2,432

GIL to gross loans and acceptances (%) 0.95 0.74 0.55 0.95 0.55

(1) GIL excludes purchased credit impaired loans.

Insurance Claims, Commissions and Changes in Policy Benefit Liabilities Insurance claims, commissions and changes in policy benefit liabilities (CCPB) were $1,189 million, an increase of $302 million from $887 million in

the prior year, primarily due to a higher increase in the fair value of policy benefit liabilities in the current quarter, resulting from larger decreases in

interest rates compared with the prior year, and the impact of stronger equity markets in the current quarter.

CCPB increased $1,386 million from the prior quarter, primarily due to an increase in the fair value of policy benefit liabilities in the current quarter

from a decrease in interest rates, compared with a decrease in the fair value of policy benefit liabilities resulting from increases in interest rates in the

prior quarter, higher annuity sales, and the impact of stronger equity markets in the current quarter. The changes related to the fair value of policy

benefit liabilities were largely offset in revenue.

Adjusted results in this Insurance Claims, Commissions and Changes in Policy Benefit Liabilities section are non-GAAP amounts or non-GAAP

measures. Please refer to the Non-GAAP Measures section.

Non-Interest Expense (1) Reported non-interest expense was $3,444 million, a decrease of $47 million or 1% from the prior year, and adjusted non-interest expense was

$3,407 million, a decrease of $52 million or 2%. Adjusted non-interest expense excludes the amortization of acquisition-related intangible assets and

acquisition integration costs in both periods. The decrease was largely due to lower travel and business development costs and focused expense

management, net of higher real estate costs, partially due to a gain on the sale of an office building in the prior year.

Reported non-interest expense was $3,444 million, a decrease of $72 million or 2% from the prior quarter, and adjusted non-interest expense was

$3,407 million, a decrease of $76 million or 2%. The decrease was driven by lower expenses across most expense categories, including lower travel

and business development costs in the current environment, partially offset by higher employee-related costs. The current quarter included two more

days.

Year-to-date reported non-interest expense was $10,629 million, a decrease of $14 million from the prior year, and adjusted non-interest expense

was $10,527 million, a decrease of $15 million or relatively unchanged, as decreases across most expense categories were partially offset by higher

technology costs.

Reported operating leverage on a net revenue basis was positive 5.2%, compared with positive 0.7% in the prior year. Adjusted operating

leverage on a net revenue basis was positive 5.3%, compared with positive 0.5% in the prior year. Year-to-date adjusted operating leverage on a net

revenue basis was positive 2.9%.

The reported efficiency ratio was 47.9%, compared with 52.4% in the prior year, and was 57.4% on a net revenue basis, compared with 60.4% in

the prior year. The adjusted efficiency ratio was 47.4%, compared with 51.9% in the prior year, and 56.8% on a net revenue basis, compared

with 59.9% in the prior year.

Non-interest expense is detailed in the unaudited interim consolidated financial statements.

Adjusted results in this Non-Interest Expense section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures

section.

(1) Effective the first quarter of 2020, the bank adopted IFRS 16, Leases (IFRS 16), recognizing the cumulative effect of adoption in opening retained earnings with no changes to prior periods. Under IFRS 16,

the bank as lessee is required to recognize a right-of-use asset and a corresponding lease liability for most leases. For the three months ended July 31, 2020, we recognized $91 million of depreciation on

the right-of-use assets recorded in non-interest expense and $13 million of interest on the lease liability recorded in interest expense. For the nine months ended July 31, 2020, we recognized $270 million

and $40 million, respectively. Refer to the Changes in Accounting Policies section on page 34 for further details.


Income Taxes The provision for income taxes was $270 million, a decrease of $155 million from the third quarter of 2019, and an increase of $132 million from the

second quarter of 2020. The effective tax rate for the current quarter was 18.0%, compared with 21.5% in the third quarter of 2019, and 16.6% in the

second quarter of 2020.

The adjusted provision for income taxes was $280 million, a decrease of $152 million from the third quarter of 2019, and an increase of

$135 million from the second quarter of 2020. The adjusted effective tax rate was 18.2% in the current quarter, compared with 21.5% in the third

quarter of 2019, and 16.7% in the second quarter of 2020. The change in the reported and adjusted effective tax rate in the current quarter relative to

the third quarter of 2019 and the second quarter of 2020 was primarily due to earnings mix.

Adjusted results in this Income Taxes section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures section.


Capital Management BMO continues to manage its capital within the capital management framework described on page 59 of BMO’s 2019 Annual Report.

Third Quarter 2020 Regulatory Capital Review BMO’s Common Equity Tier 1 (CET1) Ratio was 11.6% as at July 31, 2020, up from 11.0% at the end of the second quarter, due to lower risk-weighted

assets (RWA) and higher CET1 Capital.

CET1 Capital was $39.0 billion as at July 31, 2020, up from $38.4 billion as at April 30, 2020, primarily due to retained earnings growth and the

adjustment for transitional arrangements for expected credit loss provisioning, and to a lesser extent other net positive impacts, including the issuance

of common shares through the shareholder dividend reinvestment and share purchase plan, partially offset by lower accumulated other

comprehensive income, primarily from the impact of foreign exchange movements. CET1 Capital increased from $36.1 billion as at October 31, 2019,

primarily due to retained earnings growth, the adjustment for transitional arrangements for expected credit loss provisioning and lower net

deductions.

RWA were $337.4 billion as at July 31, 2020, down from $348.2 billion as at April 30, 2020, primarily driven by a decline in commercial lending

from the prior quarter’s elevated levels, as customers paid down facilities and loans amortized, the impact of foreign exchange movements and a

reduction in the credit valuation adjustment charge, partially offset by changes in asset quality. RWA increased from $317.0 billion as at

October 31, 2019, primarily from changes in asset quality, net business growth and regulatory and accounting changes.

The Tier 1 Capital Ratio was 13.1% as at July 31, 2020, compared with 12.5% as at April 30, 2020, and 13.0% as at October 31, 2019. The Total

Capital Ratio was 15.8% as at July 31, 2020, compared with 14.7% as at April 30, 2020, and 15.2% as at October 31, 2019. The Tier 1 Capital Ratio and

Total Capital Ratio were higher than prior periods, primarily due to the factors impacting CET1 capital and RWA, as noted above. The Total Capital Ratio

was also higher than prior periods due to the issuance of subordinated notes.

The impact of foreign exchange movements on capital ratios was largely offset. BMO’s investments in foreign operations are primarily

denominated in U.S. dollars, and the foreign exchange impact of U.S.-dollar-denominated RWA and capital deductions may result in variability in the

bank’s capital ratios. BMO may manage the impact of foreign exchange movements on its capital ratios and did so during the current quarter. Any such

activities could also impact our book value and return on equity.

BMO’s Leverage Ratio was 4.7% as at July 31, 2020, up from 4.6% as at April 30, 2020, driven by higher Tier 1 Capital and lower leverage

exposures. The Leverage Ratio increased from 4.3% as at October 31, 2019, primarily due to the temporary exclusion of central bank reserves and

sovereign-issued securities that qualify as High Quality Liquid Assets under OSFI’s Liquidity Adequacy Requirements Guideline, and higher Tier 1 Capital.

Please see the Impact of COVID-19 and Risk Management sections.

Regulatory Capital Developments On July 15, 2020, the Office of the Superintendent of Financial Institutions (OSFI) affirmed its support for the recent statements issued by the

Basel Committee on Banking Supervision and the Financial Stability Board reinforcing the usability of banks' capital buffers. OSFI requires banks to build

up capital buffers in good times so that they are available for use during periods of stress. Capital buffers allow banks to absorb losses while also

encouraging them to continue to provide loans and financial services during times of economic stress. Using capital buffers to absorb losses and

support lending is consistent with a well-functioning capital regime and with the design and intended functioning of the Basel III framework, an

international agreement to strengthen the regulation, supervision and risk management of banks.

On July 13, 2020, OSFI announced its plan to gradually restart its policy development work in the fall of 2020, as Canada takes steps towards

economic recovery. Additional details will be provided throughout the remainder of fiscal 2020, including on both the content and pace of the policy

development work to reflect the new economic and operational environment. OSFI has stated that it will seek input from the sectors under its

supervision to make the necessary adjustments.

On June 23, 2020, OSFI announced that the Domestic Stability Buffer (DSB) will remain at 1.0%, unchanged from the level set on March 13, 2020.

This decision reflects OSFI’s assessment that the current DSB level remains effective in supporting the resilience of the Canadian banking system and

the overall economy.

COVID-19 Related Developments As part of a coordinated effort by federal agencies to address the market disruption posed by COVID-19, OSFI announced a suite of modifications to

capital requirements, effective in the second quarter of 2020, to afford institutions further flexibility in addressing current conditions, while promoting

financial resilience and stability. The modifications, which remain in effect this quarter, are summarized below. For those that are temporary in nature,

OSFI has advised that they will provide guidance on the unwinding of the changes at the appropriate time.

Domestic Stability Buffer On March 13, 2020, OSFI decreased the DSB from 2.25% to 1.0%, decreasing OSFI’s minimum CET1 ratio expectation from 10.25% to 9.0% effective

immediately. The target risk-based Total Loss Absorbing Capacity (TLAC) ratio decreased to 22.5% of RWA. The target TLAC leverage ratio remains

at 6.75%. OSFI continues to expect domestic systemically important banks (D-SIBs) to fully meet the target TLAC requirements by November 1, 2021.

The DSB, which is met with CET1 capital, can be set between 0% and 2.5% of total RWA. OSFI committed that any increases to the buffer would not

take effect for at least 18 months.

OSFI’s action was taken in order to support D-SIBs’ ability to supply credit to the economy during an expected period of disruption related to

COVID-19 and market conditions. OSFI expects D-SIBs to use the additional lending capacity generated to support Canadian businesses and households,

and not use this measure to increase distributions to shareholders or employees, or to undertake share buybacks. Consistent with this, OSFI set the

expectation for all federally regulated financial institutions (FRFIs) that dividend increases and share buybacks should be halted for the time being.

https://www.bis.org/press/p200617.htm

https://www.fsb.org/2020/07/fsb-sets-out-action-to-maintain-financial-stability-during-covid/


Loan Payment Deferrals

On March 27, 2020, OSFI announced that in situations where mortgage payment deferrals are granted by deposit-taking institutions (DTIs), the loans

will continue to be treated as performing loans under the Capital Adequacy Requirements Guideline. This means that these loans will not be subject to

a different risk weight under the Standardized Approach (SA) to credit risk and will not be considered delinquent when determining the probability of

default under the Internal Rating Based (IRB) Approach, as a result of these payment deferrals. Banks should continue to assess the credit quality of

these borrowers and follow sound credit risk management practices. Other types of loans (e.g., small business loans, retail loans including credit cards

and mid-market commercial loans) that are granted similar payment deferrals by banks will be afforded the same capital treatment as described

above. After the payment deferral period ends (up to a maximum of six months from the date that the payment deferral is granted), the usual rules

for designating a loan as non-performing would apply. Based on current experience, we do not expect that the expiration of the loan payment deferral

will have a significant impact on our capital requirements.

Transitional Arrangements for Capital Treatment of Expected Loss Provisioning

On March 27, 2020, in line with other jurisdictions, OSFI introduced transitional arrangements for expected credit loss provisioning that are available

under the Basel Framework. This results in a portion of the increase in allowances, relative to the baseline level, that would otherwise be included in

Tier 2 capital, to instead be included in CET1 capital. The baseline level is the amount of Stage 1 and Stage 2 allowances as at January 31, 2020, for

October year-end DTIs. This increased amount is adjusted for tax effects and subject to a scaling factor, which is set at 70% in fiscal 2020, 50% in

fiscal 2021 and 25% in fiscal 2022.

For exposures treated under the SA, DTIs should compare Stage 1 and Stage 2 allowances allocated to the SA at the end of that quarter with the

baseline amount and multiply the increase in allowances by 100% less the DTI’s tax rate, and multiply the result by the scaling factor for the reporting

period (70% in fiscal 2020). The resulting amount should be added to CET1 capital.

For exposures treated under the IRB Approach, each quarter, DTIs should compare Stage 1 and Stage 2 allowances allocated to IRB portfolios at the

end of that quarter with the baseline amount. The increase should be multiplied by 100% less the DTI’s tax rate and then multiplied by the applicable

scaling factor for the reporting period (70% in fiscal 2020). DTIs should then take the lower of (i) this result and (ii) excess allowances eligible for

inclusion in Tier 2 capital, and add this amount to CET1 capital.

Reduction of Stressed Value-at-Risk (VaR) Multipliers under Market Risk

On March 27, 2020, OSFI announced that, on a temporary basis, it has reduced the Stressed VaR (SVaR) multipliers under market risk. Institutions

subject to market risk capital requirements and using internal models were allowed to reduce the SVaR multiplier they were subject to at the end of

the first quarter of fiscal 2020, down from a minimum value of three to one. OSFI will continue to monitor institutions' VaR and SVaR reports and will

consider removing the temporary reduction in SVaR multipliers when it deems that prevalent market conditions have returned to normal levels and

the heightened volatility present in historical minimum observation periods used for calculating regulatory VaR has subsided, which is not expected to

be earlier than April 2021.

Removal of Funding Valuation Adjustment (FVA) Hedges in Market Risk

On March 27, 2020, OSFI advised institutions to remove hedges of FVA from the calculation of market risk capital to address the asymmetry in the

existing rule where these hedges of FVA are included, while the underlying exposures of FVA are not.

Domestic Implementation of the Basel III Reforms

Consistent with the decision of the Group of Central Bank Governors and Heads of Supervision, the Basel Committee's oversight body, on

March 27, 2020, OSFI announced the delay of the domestic implementation of the remaining measures of the Basel III international capital standard to

provide additional operational capacity for banks to respond to the immediate financial stability priorities resulting from COVID-19. The implementation

date for the revisions to the Standardized Approach and IRB Approach to credit risk, the operational risk framework, the leverage ratio framework, as

well as the introduction of a more risk sensitive capital floor, has been delayed from Q1 2022 until Q1 2023. The implementation date of the final set

of revisions to the market risk framework (known as the “fundamental review of the trading book” or “FRTB”) published in January 2019, has been

delayed from Q1 2022 until Q1 2024. OSFI’s implementation date of the revised credit valuation adjustment risk framework has also been delayed

from Q1 2022 until Q1 2024.

Leverage Ratio

Similar to the risk-based capital ratios, DTIs are expected to hold operating buffers above the regulatory minimum leverage ratio. These buffers are

held in normal times to help ensure that an institution has additional flexibility in times of stress. In its announcement on March 27, 2020, OSFI

encouraged DTIs to use operating buffers that are held above the authorized leverage ratio of the institution.

On April 9, 2020, OSFI announced the temporary exclusion of certain exposures from the DTIs’ leverage ratio exposure measure. The exclusions

include exposures related to central bank reserves and sovereign-issued securities that qualify as High Quality Liquid Assets under the Liquidity

Adequacy Requirements Guideline. The treatment was effective immediately and will remain in place until April 30, 2021.

Capital Floor

To support DTIs’ ability to continue to provide lending in the current environment, on April 9, 2020, OSFI announced it was lowering the capital floor

factor, which applies to institutions using the IRB Approach to calculate credit risk, from 75% to 70%, effective immediately. The 70% floor factor will

remain in place until the domestic implementation of the capital floor under the Basel III reforms in Q1 2023.


Capital Development Related to BMO Financial Corp. (BFC)

As a U.S. bank holding company with total consolidated assets less than US$250 billion, our subsidiary BFC continues to be subject to the Federal

Reserve Board’s (FRB) Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act Stress Test (DFAST) requirements on a biennial basis,

beginning with the 2020 CCAR. CCAR is an exercise conducted by the FRB to assess whether the largest bank holding companies and foreign banking

organizations operating in the United States have sufficient capital to support their operations throughout periods of economic and financial stress and

have robust, forward-looking capital planning processes that address their unique risks. DFAST is a forward-looking exercise complementary to CCAR

and conducted by the FRB to assess whether the financial companies that it supervises have sufficient capital to absorb losses and support operations

during adverse economic conditions.

On June 25, 2020, the FRB released its 2020 CCAR and DFAST results, and on August 10, 2020, announced individual large bank capital

requirements, which will be effective October 1, 2020. BFC’s CET1 capital requirement assigned by the FRB is 10.5%, including the 4.5% minimum

CET1 ratio and a 6% stress capital buffer (SCB). BFC requested a reconsideration of its assigned SCB, as did several other banks, but the FRB declined

any adjustments. BFC is well capitalized, with a strong CET1 ratio of 12.1% as at June 30, 2020.

Regulatory Capital Regulatory capital requirements for BMO are determined in accordance with OSFI’s Capital Adequacy Requirements (CAR) Guideline, which is based on

the capital standards developed by the Basel Committee on Banking Supervision. For more information see the Enterprise-Wide Capital Management

section on pages 59 to 65 of BMO’s 2019 Annual Report.

OSFI’s capital requirements are summarized in the following table.

(% of risk-weighted assets or leverage exposures) Minimum capital

requirements Total Pillar 1 Capital

Buffer (1) Domestic Stability

Buffer (2)

OSFI capital requirements

including capital buffers

BMO Capital and Leverage Ratios as at

July 31, 2020

Common Equity Tier 1 Ratio 4.5% 3.5% 1.0% 9.0% 11.6%

Tier 1 Capital Ratio 6.0% 3.5% 1.0% 10.5% 13.1%

Total Capital Ratio 8.0% 3.5% 1.0% 12.5% 15.8%

Leverage Ratio 3.0% na na 3.0% 4.7%

(1) The minimum 4.5% CET1 Ratio requirement is augmented by the 3.5% Total Pillar 1 Capital Buffers, which can absorb losses during periods of stress. The Pillar 1 Capital Buffers include a 2.5% Capital

Conservation Buffer, a 1.0% Common Equity Surcharge for D-SIBs and a Countercyclical Buffer, as prescribed by OSFI (immaterial for the third quarter of 2020). If a bank’s capital ratios fall within the range of

this combined buffer, restrictions on discretionary distributions of earnings (such as dividends, share repurchases and discretionary compensation) would ensue, with the degree of such restrictions varying

according to the position of the bank’s ratios within the buffer range.

(2) OSFI requires all D-SIBs to hold a Domestic Stability Buffer (DSB) against Pillar 2 risks associated with systemic vulnerabilities. The DSB can range from 0% to 2.5% of total RWA and is currently set at 1.0%.

Breaches of the DSB do not result in a bank being subject to automatic constraints on capital distributions.

na – not applicable

Regulatory Capital Position (Canadian $ in millions, except as noted) Q3-2020 Q2-2020 Q4-2019

Gross common equity (1) 49,239 49,886 45,728 Regulatory adjustments applied to common equity (10,255) (11,461) (9,657)

Common Equity Tier 1 capital (CET1) 38,984 38,425 36,071

Additional Tier 1 eligible capital (2) 5,348 5,348 5,348 Regulatory adjustments applied to Tier 1 (86) (81) (218)

Additional Tier 1 capital (AT1) 5,262 5,267 5,130

Tier 1 capital (T1 = CET1 + AT1) 44,246 43,692 41,201

Tier 2 eligible capital (3) 8,953 7,582 7,189 Regulatory adjustments applied to Tier 2 (50) (66) (50)

Tier 2 capital (T2) 8,903 7,516 7,139

Total capital (TC = T1 + T2) 53,149 51,208 48,340

Risk-weighted Assets (4) 337,377 348,167 317,029

Leverage Ratio Exposures 937,266 945,468 956,493

Capital ratios (%) CET1 Ratio 11.6 11.0 11.4

Tier 1 Capital Ratio 13.1 12.5 13.0

Total Capital Ratio 15.8 14.7 15.2

Leverage Ratio 4.7 4.6 4.3

(1) Gross Common Equity includes issued qualifying common shares, retained earnings, accumulated other comprehensive income and eligible common share capital issued by subsidiaries.

(2) Additional Tier 1 Eligible Capital includes directly and indirectly issued qualifying Additional Tier 1 instruments.

(3) Tier 2 Eligible Capital includes subordinated debentures and may include certain loan loss allowances.

(4) For institutions using advanced approaches for credit risk or operational risk, there is a capital floor as prescribed in OSFI’s CAR Guideline.

Other Capital Developments During the quarter, 3,364,008 common shares were issued through the Shareholder Dividend Reinvestment and Share Purchase Plan and the exercise

of stock options.

On August 13, 2020, BMO announced the conversion results of its Non-Cumulative 5-Year Rate Reset Class B Preferred Shares Series 33 (Preferred

Shares Series 33). During the conversion period, which ran from July 27, 2020 to August 10, 2020, 118,563 Preferred Shares Series 33 were tendered

for conversion into Non-Cumulative 5-Year rate Reset Class B (Preferred Shares Series 34), which is less than the minimum 1,000,000 required to give

effect to the conversion, as described in the Preferred Shares Series 33 prospectus supplement date supplement date May 29, 2015. As a result, no

Preferred Shares Series 34 were issued and holders of Preferred Shares Series 33 retained their shares. The dividend rate for the Preferred Shares

Series 33 is 3.054% for the five-year period commencing on August 25, 2020, and ending on August 24, 2025.


On February 25, 2020, we announced our intention, subject to the approval of OSFI and the Toronto Stock Exchange, to establish a new normal

course issuer bid (NCIB) that will permit us to purchase for cancellation up to 12 million common shares over a 12-month period, commencing on or

about June 3, 2020. As previously noted and in light of OSFI’s announcement on March 13, 2020, that all share buybacks by FRFIs should be halted for

the time being, we put the process on hold. We will proceed with the new NCIB based on OSFI’s future guidance. Our previous NCIB expired on

June 2, 2020.

If a non-viable contingent capital (NVCC) trigger event were to occur, our NVCC capital instruments would be converted into BMO common shares

pursuant to automatic conversion formulas, with a conversion price based on the greater of: (i) a floor price of $5.00; and (ii) the current market price

of our common shares at the time of the trigger event (calculated using a 10-day weighted average). Based on a floor price of $5.00, these NVCC

capital instruments would be converted into approximately 3.46 billion BMO common shares, assuming no accrued interest and no declared and

unpaid dividends.

Outstanding Shares and Securities Convertible into Common Shares (1)

Number of shares

or dollar amount

As at July 31, 2020 (in millions)

Common shares (2) 642.8

Class B Preferred shares Series 25 $236

Series 26 $54

Series 27* $500

Series 29* $400

Series 31* $300

Series 33* $200

Series 35* $150

Series 36* $600

Series 38* $600

Series 40* $500

Series 42* $400

Series 44* $400

Series 46* $350

Additional Tier 1 Capital Notes 4.800% Additional Tier 1 Capital Notes* US$500

Medium-Term Notes* Series H - Second Tranche $1,000

Series I - First Tranche $1,250

Series I - Second Tranche $850

3.803% Subordinated Notes due 2032 US$1,250

4.338% Subordinated Notes due 2028 US$850

Series J - First Tranche $1,000

Series J - Second Tranche $1,250

Stock options Vested 3.7

Non-vested 2.9

* Convertible into common shares

(1) Details on the Medium-Term Notes are outlined in Note 15 to the audited consolidated financial

statements on page 176 of BMO’s 2019 Annual Report. Details on share capital and Additional

Tier 1 Capital Notes are outlined in Note 6 to the unaudited interim consolidated financial

statements and Note 16 to the audited annual consolidated financial statements on page 177

of BMO’s 2019 Annual Report.

(2) Common Shares are net of 206,527 treasury shares.

Dividends On August 25, 2020, BMO announced that the Board of Directors had declared a quarterly dividend on common shares of $1.06 per share, unchanged

from the preceding quarter, and up $0.03 per share or 3% from the prior year. The dividend is payable on November 26, 2020, to shareholders of

record on November 2, 2020. Common shareholders may elect to have their cash dividends reinvested in common shares of BMO, in accordance with

the Shareholder Dividend Reinvestment and Share Purchase Plan (the “Plan”). Effective March 13, 2020, OSFI prohibited FRFIs from increasing their

common share dividend. OSFI will advise at the appropriate time on the unwinding of this guidance.

On August 25, 2020, we announced that commencing with common share dividend declared for the fourth quarter of fiscal 2020, and

subsequently until further notice, common shares under the Plan will be purchased on the open market without a discount.

For the purposes of the Income Tax Act (Canada) and any similar provincial and territorial legislation, BMO designates all dividends paid or deemed

to be paid on both its common and preferred shares as “eligible dividends”, unless indicated otherwise.

Caution The foregoing Capital Management section contains forward-looking statements. Please refer to the Caution Regarding Forward-Looking Statements.


Review of Operating Groups’ Performance How BMO Reports Operating Group Results The following sections review the financial results of each of our operating groups and operating segments for the third quarter of 2020. See also the

Impact of COVID-19 and Risk Management sections.

Periodically, certain business lines and units within the business lines are transferred between client and corporate support groups to more closely

align BMO’s organizational structure with its strategic priorities. In addition, allocations of revenue, provisions for credit losses and expenses are

updated to better align with current experience.

Effective November 1, 2019, the bank adopted IFRS 16, Leases (IFRS 16), recognizing the cumulative effect of adoption in opening retained

earnings with no changes to prior years. Under IFRS 16, the bank as lessee is required to recognize a right-of-use asset and a corresponding lease

liability for most leases. Depreciation on the right-of-use assets has been recorded in non-interest expense and interest on the lease liability in interest

expense. Refer to the Changes in Accounting Policies section on page 34 for further details.

BMO analyzes revenue at the consolidated level based on GAAP revenue as reported in the consolidated financial statements rather than on a

taxable equivalent basis (teb), which is consistent with our Canadian peer group. Like many banks, we analyze revenue on a teb basis at the operating

group level. Revenue and the provision for income taxes are increased on tax-exempt securities to an equivalent before-tax basis to facilitate

comparisons of income between taxable and tax-exempt sources. The offset to the group teb adjustments is reflected in Corporate Services revenue

and provision for income taxes.

Personal and Commercial Banking (P&C)

(Canadian $ in millions, except as noted) Q3-2020 Q2-2020 Q3-2019 YTD-2020 YTD-2019

Net interest income (teb) 2,616 2,624 2,566 7,848 7,502 Non-interest revenue 745 780 841 2,355 2,422

Total revenue (teb) 3,361 3,404 3,407 10,203 9,924 Provision for (recovery of) credit losses on impaired loans 366 336 235 972 504

Provision for (recovery of) credit losses on performing loans 536 360 67 927 85

Total provision for credit losses 902 696 302 1,899 589 Non-interest expense 1,712 1,793 1,765 5,252 5,206

Income before income taxes 747 915 1,340 3,052 4,129 Provision for income taxes (teb) 164 215 322 718 997

Reported net income 583 700 1,018 2,334 3,132

Amortization of acquisition-related intangible assets (1) 10 11 12 31 34

Adjusted net income 593 711 1,030 2,365 3,166

Net income growth (%) (42.8) (31.4) 1.3 (25.5) 8.0 Adjusted net income growth (%) (42.4) (31.1) 1.2 (25.3) 7.8

Revenue growth (%) (1.4) 5.4 6.4 2.8 6.7

Non-interest expense growth (%) (3.0) 4.3 4.0 0.9 5.2

Adjusted non-interest expense growth (%) (2.9) 4.4 4.0 1.0 5.3

Return on equity (%) 8.5 10.5 16.4 11.7 17.4

Adjusted return on equity (%) 8.7 10.7 16.6 11.9 17.6

Operating leverage (teb) (%) 1.6 1.1 2.4 1.9 1.5

Adjusted operating leverage (teb) (%) 1.5 1.0 2.4 1.8 1.4

Efficiency ratio (teb) (%) 51.0 52.7 51.8 51.5 52.5

Adjusted efficiency ratio (teb) (%) 50.6 52.3 51.4 51.1 52.0

Net interest margin on average earning assets (teb) (%) 2.82 2.86 2.94 2.86 2.96

Average earning assets 369,298 372,526 346,045 366,050 338,334

Average gross loans and acceptances 377,828 381,807 355,222 375,398 346,430

Average net loans and acceptances 375,420 379,838 353,617 373,355 344,850

Average deposits 357,162 326,411 283,924 329,935 277,773

(1) Total P&C before tax amounts of $13 million in Q3-2020, $15 million in both Q2-2020 and Q3-2019; $41 million for YTD-2020 and $44 million for YTD-2019 are included in non-interest expense.


The Personal and Commercial Banking (P&C) operating group represents the sum of our two retail and commercial operating segments, Canadian

Personal and Commercial Banking (Canadian P&C) and U.S. Personal and Commercial Banking (U.S. P&C). The P&C banking business reported net

income was $583 million, compared with $1,018 million in the prior year. Adjusted net income was $593 million, compared with $1,030 million in the

prior year, and excludes the amortization of acquisition-related intangible assets. Reported and adjusted net income were impacted by higher

provisions for credit losses, which increased $600 million pre-tax, or $441 million after tax from the prior year. These operating segments are reviewed

separately in the sections that follow.

Adjusted results in this P&C section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures section.


Canadian Personal and Commercial Banking (Canadian P&C) (Canadian $ in millions, except as noted) Q3-2020 Q2-2020 Q3-2019 YTD-2020 YTD-2019

Net interest income 1,509 1,495 1,500 4,561 4,342

Non-interest revenue 453 465 543 1,443 1,564

Total revenue 1,962 1,960 2,043 6,004 5,906

Provision for (recovery of) credit losses on impaired loans 257 212 174 607 410


Total provision for credit losses 570 497 204 1,219 462

Non-interest expense 960 976 961 2,922 2,860

Income before income taxes 432 487 878 1,863 2,584

Provision for income taxes 112 126 228 482 670

Reported net income 320 361 650 1,381 1,914

Amortization of acquisition-related intangible assets (1) - 1 1 1 2

Adjusted net income 320 362 651 1,382 1,916

Personal revenue 1,213 1,218 1,272 3,718 3,701 Commercial revenue 749 742 771 2,286 2,205

Net income growth (%) (50.8) (41.4) 1.1 (27.8) 1.9

Revenue growth (%) (4.0) 2.4 5.9 1.6 4.6

Non-interest expense growth (%) 0.0 3.4 4.0 2.2 3.8

Adjusted non-interest expense growth (%) 0.0 3.4 4.0 2.2 3.8

Return on equity (%) 11.0 13.0 26.4 16.6 26.9


Operating leverage (%) (4.0) (1.0) 1.9 (0.6) 0.8

Adjusted operating leverage (%) (4.0) (1.0) 1.9 (0.6) 0.8

Efficiency ratio (%) 49.0 49.8 47.1 48.7 48.4

Net interest margin on average earning assets (%) 2.54 2.58 2.66 2.60 2.63





(1) Before tax amounts of $nil in Q3-2020, $1 million in both Q2-2020 and Q3-2019; $1 million for YTD-2020 and $2 million for YTD-2019 are included in non-interest expense.


Q3 2020 vs. Q3 2019 Canadian P&C reported and adjusted net income were $320 million, compared with reported net income of $650 million in the prior year, and adjusted

net income of $651 million. Adjusted net income excludes the amortization of acquisition-related intangible assets. Net income was lower due to

higher provisions for credit losses and lower revenue.

Revenue was $1,962 million, compared with $2,043 million in the prior year, due to lower non-interest revenue, with net interest income

relatively unchanged, as higher balances across most products were partially offset by lower margins. Net interest margin of 2.54% decreased 12 basis

points, driven by lower deposit and loan margins, partially offset by the benefit of deposits growing faster than loans.

Personal revenue decreased $59 million or 5%, due to lower margins and lower non-interest revenue, partially offset by higher balances.

Commercial revenue decreased $22 million or 3%, due to lower non-interest revenue and lower margins, partially offset by higher balances across all

products.

Total provision for credit losses was $570 million, an increase of $366 million from the prior year. The provision for credit losses on impaired loans

was $257 million, an increase of $83 million, primarily due to higher commercial provisions. There was a $313 million provision for credit losses on

performing loans in the current quarter, compared with a $30 million provision for credit losses on performing loans in the prior year.

Non-interest expense was $960 million, relatively unchanged from the prior year, due to higher pension and technology costs offset by lower

employee-related costs and discretionary expenses.

Average gross loans and acceptances increased $12.0 billion or 5% from the prior year to $251.0 billion. Total personal lending balances (excluding

retail cards) increased 4%. Commercial loan balances (excluding corporate cards) increased 9%. Average deposits increased $36.0 billion or 20% to

$213.1 billion. Personal deposit balances increased 14% and commercial deposit balances increased 31%.

Gross loans and acceptances as at July 31, 2020, increased $8.9 billion or 4% from the prior year to $250.6 billion, with growth in personal loans

(excluding retail cards) of 3% and growth in commercial loans (excluding corporate cards) of 6%. Deposits as at July 31, 2020, increased $37.4 billion

or 21% to $217.4 billion, with growth in personal deposit balances of 13% and in commercial deposit balances of 33%, reflecting the higher liquidity

retained by customers, due to the impact of COVID-19.


Q3 2020 vs. Q2 2020 Reported and adjusted net income were $320 million, compared with reported net income of $361 million and adjusted net income of $362 million in

the prior quarter, primarily driven by higher provision for credit losses, partially offset by lower expenses and higher revenue.

Revenue was $1,962 million, an increase of $2 million from the prior quarter, due to higher balances across most products and the impact of two

more days in the current quarter, partially offset by lower margins and lower non-interest revenue. Net interest margin of 2.54% decreased 4 basis

points from the prior quarter due to lower deposit margins, reflecting the recent low interest rate environment, partially offset by the benefit of

deposits growing faster than loans.

Personal revenue decreased $5 million, due to lower margins, partially offset by more days in the current quarter and higher balances. Commercial

revenue increased $7 million or 1%, primarily due to higher deposit balances and more days in the current quarter, partially offset by lower margins

and lower non-interest revenue.

Total provision for credit losses was $570 million, an increase of $73 million from the prior quarter. The provision for credit losses on impaired

loans increased $45 million, primarily due to higher commercial provisions. There was a $313 million provision for credit losses on performing loans in

the current quarter, compared with a $285 million provision for credit losses on performing loans in the prior quarter.

Non-interest expense was $960 million, a decrease of $16 million or 2% from the prior quarter, primarily due to lower employee-related costs and

discretionary spending, reflective of our focus on expense management in the current environment.

Average gross loans and acceptances decreased $0.4 billion from the prior quarter, while average deposits increased $16.0 billion or 8%.

Gross loans and acceptances as at July 31, 2020, decreased $2.3 billion or 1% from the prior quarter, primarily due to a decline in commercial loans

(excluding corporate cards) of 4%. Deposits as at July 31, 2020, increased $10.4 billion or 5%, with growth of 3% in personal deposit balances and 8%

in commercial balances.

Q3 YTD 2020 vs. Q3 YTD 2019 Reported net income was $1,381 million, compared with $1,914 million in the prior year, and adjusted net income of $1,382 million, compared with

$1,916 million. The decrease largely reflects higher provisions for credit losses, with higher revenue partially offset by higher expenses.

Revenue was $6,004 million, an increase of $98 million or 2% from the prior year, due to higher balances across most products, partially offset by

lower margins and lower non-interest revenue. Net interest margin of 2.60% decreased 3 basis points from the prior year, driven by lower loan and

deposit margins, partially offset by the benefit of deposits growing faster than loans.

Personal revenue increased $17 million, primarily due to higher balances across all products, partially offset by lower margins and lower non-

interest revenue. Commercial revenue increased $81 million or 4%, primarily due to higher balances across most products, partially offset by lower

non-interest revenue and lower margins.

Total provision for credit losses was $1,219 million, an increase of $757 million from the prior year. The provision for credit losses on impaired

loans increased $197 million, primarily due to higher commercial provisions. There was a $612 million provision for credit losses on performing loans

in the current year, compared with a $52 million provision for credit losses on performing loans in the prior year.

Non-interest expense was $2,922 million, an increase of $62 million or 2% from the prior year, primarily due to higher pension and technology

costs.

Average gross loans and acceptances increased $15.3 billion or 6% from the prior year to $249.9 billion, and average deposits increased

$28.4 billion or 17% to $200.6 billion.

Adjusted results in this Canadian P&C section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures section.


U.S. Personal and Commercial Banking (U.S. P&C) (US$ in millions, except as noted) Q3-2020 Q2-2020 Q3-2019 YTD-2020 YTD-2019

Net interest income (teb) 815 818 804 2,431 2,375

Non-interest revenue 215 228 225 675 645

Total revenue (teb) 1,030 1,046 1,029 3,106 3,020



Total provision for credit losses 247 143 73 503 95


Income before income taxes 230 311 350 880 1,162

Provision for income taxes (teb) 38 65 72 175 247

Reported net income 192 246 278 705 915


Adjusted net income 199 253 286 727 939

Personal revenue 330 315 348 973 1,023 Commercial revenue 700 731 681 2,133 1,997

Net income growth (%) (30.9) (19.4) (0.3) (23.0) 14.6

Adjusted net income growth (%) (30.3) (19.1) (0.5) (22.6) 13.9

Revenue growth (%) 0.2 5.7 5.3 2.9 6.1

Non-interest expense growth (%) (8.7) 1.5 2.1 (2.3) 3.2

Adjusted non-interest expense growth (%) (8.7) 1.7 2.3 (2.2) 3.4

Return on equity (%) 6.6 8.7 9.8 8.2 11.2


Operating leverage (teb) (%) 8.9 4.2 3.2 5.2 2.9

Adjusted operating leverage (teb) (%) 8.9 4.0 3.0 5.1 2.7



Net interest margin on average earning assets (teb) (%) 3.31 3.36 3.46 3.34 3.59





(Canadian $ equivalent in millions)

Net interest income (teb) 1,107 1,129 1,066 3,287 3,160








Provision for income taxes (teb) 52 89 94 236 327

Reported net income 263 339 368 953 1,218

Adjusted net income 273 349 379 983 1,250

Net income growth (%) (28.7) (16.3) 1.5 (21.8) 19.1 Adjusted net income growth (%) (28.1) (16.0) 1.3 (21.4) 18.4

Revenue growth (%) 2.6 9.8 7.2 4.5 10.1







(1) Before tax amounts of US$9 million in Q3-2020, US$10 million in Q2-2020 and US$11 million in Q3-2019; US$29 million for YTD-2020 and US$32 million for YTD-2019 are included in non-interest expense.


Q3 2020 vs. Q3 2019 U.S. P&C reported net income was $263 million, compared with $368 million in the prior year, and adjusted net income was $273 million, compared

with $379 million. Adjusted net income excludes the amortization of acquisition-related intangible assets. All amounts in the remainder of this section

are on a U.S. dollar basis.

Reported net income was $192 million, compared with $278 million in the prior year, and adjusted net income was $199 million, compared with

$286 million, primarily due to higher provisions for credit losses, partially offset by lower expenses.

Revenue was $1,030 million, an increase of $1 million from the prior year, primarily due to higher deposit and loan balances, and higher loan

margins, partially offset by lower deposit product margins and non-interest revenue. Net interest margin of 3.31% decreased 15 basis points, primarily

due to lower deposit product margins driven by the impact of a lower rate environment, partially offset by the impact of deposits growing faster than

loans.

Personal revenue decreased $18 million or 5%, largely due to lower deposit revenue. Commercial revenue increased $19 million or 3%, primarily

due to higher deposit and loan balances, partially offset by lower deposit product margins.


was $81 million, an increase of $36 million, due to higher commercial and consumer provisions. There was a $166 million provision for credit losses on

performing loans in the current quarter, compared with a $28 million provision for credit losses on performing loans in the prior year.


Non-interest expense was $553 million, a decrease of $53 million or 9% from the prior year, and adjusted non-interest expense was $544 million,

a decrease of $51 million or 9%, primarily due to lower technology, employee and advertising expenses, as well as a continued focus on expense

management.

Average gross loans and acceptances increased $5.8 billion or 7% from the prior year to $93.3 billion, driven by growth in commercial loans and

personal loans of 7% and 6%, respectively. Average deposits increased $25.5 billion or 32% to $106.1 billion, with 60% growth in commercial deposit

balances and 10% growth in personal deposit balances.

Gross loans and acceptances as at July 31, 2020, increased $3.0 billion or 3% from the prior year to $90.9 billion, primarily driven by growth in

commercial loans of 4% and growth in personal loans of 2%, both resulting from growth in government lending loan programs due to the impact of

COVID-19. Deposits as at July 31, 2020, increased $23.2 billion or 28% to $105.6 billion, with growth in commercial deposit balances of 53% and in

personal deposit balances of 9%, reflecting the higher liquidity retained by customers due to the impact of COVID-19.

Q3 2020 vs. Q2 2020 Reported net income was $263 million, compared with $339 million in the prior quarter, and adjusted net income was $273 million, compared with

$349 million. All amounts in the remainder of this section are on a U.S. dollar basis.

Reported net income was $192 million, compared with $246 million in the prior quarter, and adjusted net income was $199 million, compared

with $253 million, due to higher provisions for credit losses with lower revenue, partially offset by lower expenses.

Revenue was $1,030 million, compared with $1,046 million in the prior quarter, primarily due to lower deposit product margins and non-interest

revenue, partially offset by higher deposit balances and the impact of two more days in the current quarter. Net interest margin of 3.31%

decreased 5 basis points, primarily due to lower deposit product margins, driven by the impact of the lower rate environment, partially offset by

higher deposit balances.

Personal revenue increased $15 million or 5%, due to higher mortgage banking-related revenue and more days in the current quarter, net of

lower deposit revenue. Commercial revenue decreased $31 million or 4%, primarily due to lower deposit revenue and loan fee revenue, net of more

days in the current quarter.

Total provision for credit losses was $247 million, an increase of $104 million from the prior quarter. The provision for credit losses on impaired

loans was $81 million, a decrease of $8 million from the prior quarter, due to lower commercial provisions. There was a $166 million provision for

credit losses on performing loans in the current quarter, compared with a $54 million provision for credit losses on performing loans in the prior

quarter.

Non-interest expense was $553 million, a decrease of $39 million or 6% from the prior quarter, and adjusted non-interest expense was

$544 million, a decrease of $38 million or 6%, primarily due to lower technology, employee-related costs and other discretionary spending, reflective

of our focus on expense management in the current environment.

Average gross loans and acceptances decreased $1.0 billion or 1% from the prior quarter. Average deposits increased $12.5 billion or 13%, with 22%

growth in commercial deposit balances and 5% growth in personal deposit balances.

Gross loans and acceptances as at July 31, 2020, decreased $7.4 billion or 8% from the prior quarter, primarily due to lower commercial loans

of 9%. Deposits as at July 31, 2020, increased $2.0 billion or 2%.

Q3 YTD 2020 vs. Q3 YTD 2019 Reported net income was $953 million, compared with $1,218 million in the prior year, and adjusted net income was $983 million, compared with

$1,250 million. All amounts in the remainder of this section are on a U.S. dollar basis.

Reported net income was $705 million, compared with $915 million in the prior year, and adjusted net income was $727 million, compared with

$939 million, primarily due to higher provisions for credit losses, partially offset by higher revenue and lower expenses.

Revenue was $3,106 million, an increase of $86 million or 3% from the prior year, primarily due to growth in deposit and loan balances, as well as

higher non-interest revenue, partially offset by lower deposit product margins, reflecting the impact of lower rates. Net interest margin of 3.34%

decreased 25 basis points, primarily due to lower deposit product margins, driven by the impact of the lower rate environment, partially offset by

deposits growing faster than loans.

Personal revenue decreased $50 million or 5%, due to lower deposit revenue. Commercial revenue increased $136 million or 7%, due to higher

deposit and loan balances, as well as higher non-interest revenue, partially offset by lower margins on deposits.


increased $200 million, as a result of higher commercial and consumer provisions. In addition, the prior year benefitted from one-time recoveries on

both commercial and consumer provisions. There was a $233 million provision for credit losses on performing loans in the current year, compared with

a $25 million provision in the prior year.

Non-interest expense was $1,723 million, a decrease of $40 million or 2%, from the prior year, and adjusted non-interest expense was

$1,694 million, a decrease of $37 million or 2%, due to lower employee, advertising and technology costs, reflective of a continued focus on expense

management.

Average gross loans and acceptances increased $8.8 billion or 10% from the prior year to $92.8 billion, driven by commercial loan growth of 11%

and higher personal loan volumes of 8%. Average deposits increased $16.2 billion or 20% from the prior year to $95.6 billion, with 36% growth in

commercial deposit balances and 9% growth in personal deposit balances.

Adjusted results in this U.S. P&C section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures section.


BMO Wealth Management (Canadian $ in millions, except as noted) Q3-2020 Q2-2020 Q3-2019 YTD-2020 YTD-2019

Net interest income 229 212 237 672 699

Non-interest revenue 2,255 678 1,876 4,727 5,396

Total revenue 2,484 890 2,113 5,399 6,095

Insurance claims, commissions and changes in policy benefit liabilities (CCPB) 1,189 (197) 887 1,708 2,374


Provision for (recovery of) credit losses on impaired loans 1 3 - 4 1

Provision for (recovery of) credit losses on performing loans 7 3 (2) 13 (1)

Total provision for (recovery of) credit losses 8 6 (2) 17 -



Provision for income taxes 109 49 93 261 265

Reported net income 341 144 250 776 793


Adjusted net income 349 153 258 802 821

Traditional Wealth businesses reported net income 271 160 226 640 625 Traditional Wealth businesses adjusted net income 279 169 234 666 653

Insurance reported net income (loss) 70 (16) 24 136 168

Insurance adjusted net income (loss) 70 (16) 24 136 168

Net income growth (%) 36.9 (52.8) (14.4) (2.1) (7.1)

Adjusted net income growth (%) 35.5 (51.5) (14.4) (2.3) (7.1)

Revenue growth (%) 17.6 (51.8) 37.2 (11.4) 28.9

Revenue growth, net of CCPB (%) 5.7 (15.2) (3.6) (0.8) (1.3)

Adjusted CCPB 1,189 (197) 887 1,708 2,374

Revenue growth, net of adjusted CCPB (%) 5.7 (15.2) (3.6) (0.8) (1.3)



Return on equity (%) 21.1 8.9 15.3 16.1 16.7


Operating leverage, net of CCPB (%) 11.1 (15.9) (4.6) 0.2 (2.4)

Adjusted operating leverage, net of CCPB (%) 11.1 (16.0) (4.8) 0.1 (2.5)

Reported efficiency ratio (%) 33.7 99.9 41.9 48.8 43.7

Reported efficiency ratio, net of CCPB (%) 64.6 81.8 72.2 71.4 71.6

Adjusted efficiency ratio (%) 33.3 98.6 41.4 48.2 43.1

Adjusted efficiency ratio, net of CCPB (%) 63.7 80.7 71.3 70.5 70.6

Assets under management 498,020 464,166 464,711 498,020 464,711

Assets under administration (2) 411,122 400,649 391,622 411,122 391,622

Average assets 46,308 45,175 41,891 45,234 40,345




(1) Before tax amounts of $11 million in each of Q3-2020, Q2-2020 and Q3-2019; $33 million for YTD-2020 and $36 million for YTD-2019 are included in non-interest expense.

(2) We have certain assets under management that are also administered by us and included in assets under administration.


Q3 2020 vs. Q3 2019 BMO Wealth Management reported net income was $341 million, an increase of $91 million or 37% from the prior year, and adjusted net income was

$349 million, an increase of $91 million or 35%. Adjusted net income excludes the amortization of acquisition-related intangible assets. Traditional

Wealth reported net income was $271 million, an increase of $45 million or 20%, and adjusted net income was $279 million, an increase of

$45 million or 19%, primarily driven by lower expenses, including benefits from cost containment programs, and stronger global markets, partially

offset by moderately lower net interest income, as lower margin was primarily offset by the benefit from loan and deposit growth, and higher

provisions for credit losses. Insurance net income was $70 million, an increase of $46 million, primarily due to below-trend reinsurance results and the

impact of unfavourable market movements in the prior year, relative to favourable market movements in the current year.

Revenue was $2,484 million, an increase of $371 million or 18%. Revenue, net of CCPB, was $1,295 million, an increase of $69 million or 6%.

Revenue in Traditional Wealth was $1,176 million, an increase of $23 million or 2%, primarily due to stronger global markets benefitting our

diversified businesses and higher online brokerage revenue, partially offset by lower net interest revenue. Insurance revenue, net of CCPB, increased

$46 million from the prior year, primarily due to the net income drivers noted above.

Non-interest expense was $837 million, a decrease of $48 million or 5% from the prior year, and adjusted non-interest expense was $826 million,

a decrease of $48 million or 5%, or 6% excluding the impact of the stronger U.S. dollar, primarily due to benefits from cost containment programs.

Assets under management increased $33.3 billion or 7%, and assets under administration increased $19.5 billion or 5%, primarily driven by

stronger global markets, favourable foreign exchange and growth in client assets. Average gross loans and average deposits increased 12% and 25%,

respectively.


Q3 2020 vs. Q2 2020 Reported net income was $341 million, an increase of $197 million or 137% from the prior quarter, and adjusted net income was $349 million, an

increase of $196 million or 128%. Traditional Wealth reported net income was $271 million, an increase of $111 million or 70% from the prior quarter,

and adjusted net income was $279 million, an increase of $110 million or 66%, primarily due to the impact of a legal provision in the prior quarter,

lower expenses, including benefits from cost containment programs, and higher revenue. Insurance net income was $70 million, an increase of

$86 million, primarily due to the impact of unfavourable impact of market movements and lower underlying results in the prior quarter, relative to

favourable market movements in the current quarter.

Revenue, net of CCPB, was $1,295 million, an increase of $208 million or 19%. Revenue in Traditional Wealth was $1,176 million, an increase of

$102 million or 10%, primarily due to the impact of the legal provision and stronger global markets. Net insurance revenue was $119 million, an

increase of $106 million, primarily due to the net income drivers noted above.

Non-interest expense was $837 million, a decrease of $51 million or 6% from the prior quarter, and adjusted non-interest expense was

$826 million, a decrease of $51 million or 6%, benefitting from cost containment programs and impacts from the current environment.

Assets under management increased $33.9 billion or 7% from the prior quarter, and assets under administration increased $10.5 billion or 3%,

primarily driven by stronger global markets and growth in client assets, partially offset by unfavourable foreign exchange. Average gross loans and

average deposits increased 2% and 5%, respectively.

Q3 YTD 2020 vs. Q3 YTD 2019 Reported net income was $776 million, compared with $793 million in the prior year, and adjusted net income was $802 million, compared with

$821 million. Traditional Wealth reported net income was $640 million, an increase of $15 million or 3%, and adjusted net income was $666 million,

an increase of $13 million or 2%, primarily due to lower expenses including benefits from cost containment programs, partially offset by the legal

provision in the current year. Insurance net income was $136 million, compared with $168 million in the prior year, primarily due to lower underlying

business results.

Revenue was $5,399 million, compared with $6,095 million in the prior year. Revenue, net of CCPB, was $3,691 million, compared with

$3,721 million. Revenue in Traditional Wealth was $3,411 million, an increase of $11 million, primarily due to stronger global markets on average and

growth in online brokerage revenue, offset by the legal provision in the current year. Insurance revenue, net of CCPB, was $280 million, a decrease of

$41 million from the prior year, due to the net income drivers noted above.

Non-interest expense was $2,637 million, a decrease of $26 million or 1%, and adjusted non-interest expense was $2,604 million, a decrease of

$23 million or 1%, due to benefits from cost containment programs, partially offset by higher revenue-based costs.

Adjusted results in this BMO Wealth Management section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures

section.


BMO Capital Markets (Canadian $ in millions, except as noted) Q3-2020 Q2-2020 Q3-2019 YTD-2020 YTD-2019

Net interest income (teb) 952 855 537 2,503 1,695

Non-interest revenue 576 196 670 1,445 1,885






Income (loss) before income taxes 566 (115) 398 918 1,053

Provision for (recovery of) income taxes (teb) 140 (41) 84 210 233

Reported net income (loss) 426 (74) 314 708 820

Acquisition integration costs (1) 4 2 2 8 8


Adjusted net income (loss) 435 (68) 319 729 836

Global Markets revenue 981 564 667 2,368 2,018 Investment and Corporate Banking revenue 547 487 540 1,580 1,562

Net income growth (%) 35.7 (129.5) 4.1 (13.7) (4.6)

Adjusted net income growth (%) 36.2 (126.5) 5.1 (12.9) (3.0)

Revenue growth (%) 26.6 (14.9) 8.7 10.3 10.2

Non-interest expense growth (%) 3.2 (15.0) 13.2 (2.1) 17.9

Adjusted non-interest expense growth (%) 2.5 (15.3) 12.7 (2.4) 17.1

Return on equity (%) 13.6 (3.0) 11.3 8.0 9.9

Adjusted return on equity (%) 13.9 (2.8) 11.5 8.2 10.1

Operating leverage (teb) (%) 23.4 0.1 (4.5) 12.4 (7.7)

Adjusted operating leverage (teb) (%) 24.1 0.4 (4.0) 12.7 (6.9)



Average assets 379,131 380,856 343,292 370,363 342,829



(1) KGS-Alpha and Clearpool acquisition integration costs before tax amounts of $5 million in Q3-2020, $3 million in both Q2-2020 and Q3-2019; $11 million for both YTD-2020 and YTD-2019 are included in non-

interest expense.

(2) Before tax amounts of $8 million in Q3-2020, $4 million in Q2-2020 and $3 million in Q3-2019; $17 million for YTD-2020 and $10 million for YTD-2019 are included in non-interest expense.


Q3 2020 vs. Q3 2019 BMO Capital Markets reported net income was $426 million, an increase of $112 million or 36% from the prior year, and adjusted net income was

$435 million, an increase of $116 million or 36%. Adjusted net income excludes the amortization of acquisition-related intangible assets and

acquisition integration costs. Strong revenue performance was partially offset by higher provisions for credit losses and higher expenses.

Revenue was $1,528 million, an increase of $321 million or 27% from the prior year, or 25% excluding the impact of the stronger U.S. dollar.

Global Markets revenue increased, primarily driven by strong client activity in interest rate and commodities trading, partially offset by lower equities

trading. Investment and Corporate Banking revenue increased, as higher corporate banking-related revenue was offset by lower underwriting and

advisory fee revenue.


was $79 million, an increase of $72 million. There was a provision for credit losses on performing loans of $58 million in the current quarter, compared

with a $3 million provision for credit losses on performing loans in the prior year.

Non-interest expense was $825 million, an increase of $26 million or 3% from the prior year, and adjusted non-interest expense was $812 million,

an increase of $19 million or 3%, or 1% excluding the impact of the stronger U.S. dollar. The increase was primarily driven by higher performance-

based costs, largely offset by lower travel and business development expenses and other employee-related costs, reflective of our focus on expense

management.

Average gross loans and acceptances increased $10.2 billion or 17% from the prior year to $71.3 billion, or 15% excluding the impact of the

stronger U.S. dollar. Gross loans and acceptances as at July 31, 2020, increased $4.8 billion or 8% from the prior year to $67.2 billion, or 7% excluding

the impact of the stronger U.S. dollar.


Q3 2020 vs. Q2 2020 Reported net income was $426 million, an increase of $500 million from the net loss reported in the prior quarter, and adjusted net income was

$435 million, an increase of $503 million.

Revenue was $1,528 million, an increase of $477 million or 45% from the prior quarter, or 47% excluding the impact of the weaker U.S. dollar.

Global Markets revenue increased, primarily driven by an increase in interest rate trading due to strong client activity, and higher equities trading,

partially offset by lower foreign exchange trading revenue. The prior quarter included negative impacts from equity linked notes related businesses

and the unfavourable impact from a widening of credit and funding spreads on derivative valuation adjustments. Investment and Corporate Banking

revenue increased, primarily due to higher underwriting and advisory fees, partially offset by lower corporate banking-related revenue from lower net

securities gains. The prior quarter also reflected markdowns on the held-for-sale loan portfolio.

Total provision for credit losses was $137 million, a decrease of $271 million from the prior quarter. The provision for credit losses on impaired

loans increased $6 million in the current quarter. There was a provision for credit losses on performing loans of $58 million in the current quarter,

compared with a $335 million provision for credit losses on performing loans in the prior quarter.

Non-interest expense was $825 million an increase of $67 million or 9%, and adjusted non-interest expense was $812 million, an increase of

$61 million or 8% from the prior quarter, or 9% excluding the impact of the weaker U.S. dollar. The increase was primarily driven by higher

performance-based costs, partially offset by lower travel and business development costs and other employee-related costs, reflective of our focus on

expense management.

Average gross loans and acceptances increased $0.5 billion or 1% from the prior quarter, or 2% excluding the impact of the weaker U.S. dollar.

Gross loans and acceptances as at July 31, 2020, decreased $10.4 billion or 13% from the prior quarter, or 11% excluding the impact of the weaker

U.S. dollar, reflecting decreases in loan utilizations from particularly high levels in the prior quarter.

Q3 YTD 2020 vs. Q3 YTD 2019 Reported net income was $708 million, compared with $820 million in the prior year and adjusted net income was $729 million, compared with

$836 million, primarily due to higher provisions for credit losses, partially offset by higher revenue and lower expenses.

Revenue was $3,948 million, an increase of $368 million or 10% from the prior year. Global Markets revenue increased, driven by strong client

activity in interest rate, commodities and foreign exchange trading, partially offset by lower equities trading. The current year included the impacts

from volatile markets in the second quarter, as noted above. The prior year included a benefit from a positive fair value adjustment in interest rate

trading, partially offset by a negative fair value adjustment in equities trading. Investment and Corporate Banking revenue increased, with higher

corporate banking-related revenue largely offset by markdowns on the held-for-sale loan portfolio in the current year, as well as lower underwriting

and advisory fee revenue.


was $205 million, an increase of $185 million from the prior year. There was a $390 million provision for credit losses on performing loans in the

current year, compared with a $20 million provision for credit losses on performing loans in the prior year.

Non-interest expense was $2,435 million and adjusted non-interest expense was $2,407 million, a decrease of $59 million or 2% from the prior

year, or 3% excluding the impact of the stronger U.S. dollar. The decrease was primarily due to a severance expense in the prior year and lower travel

and business development costs, partially offset by higher technology and transaction-based costs, and other employee-related expenses.

Average gross loans and acceptances increased $8.8 billion or 15% from the prior year to $68.1 billion, or 14% excluding the impact of the

stronger U.S. dollar.

Adjusted results in this BMO Capital Markets section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures

section.


Corporate Services (Canadian $ in millions, except as noted) Q3-2020 Q2-2020 Q3-2019 YTD-2020 YTD-2019

Net interest income before group teb offset (161) (95) (49) (325) (153)

Group teb offset (101) (78) (74) (257) (219)

Net interest income (teb) (262) (173) (123) (582) (372)


Total revenue (teb) (184) (81) (61) (350) (203)

Provision for (recovery of) credit losses on impaired loans - 1 1 2 (5)

Provision for (recovery of) credit losses on performing loans 7 7 (5) 8 (5)

Total provision for (recovery of) credit losses 7 8 (4) 10 (10)

Non-interest expense 70 77 42 305 287

Income (loss) before income taxes (261) (166) (99) (665) (480)

Provision for (recovery of) income taxes (teb) (143) (85) (74) (360) (299)

Reported net loss (118) (81) (25) (305) (181)

Adjusted net loss (118) (81) (25) (305) (181)

Adjusted non-interest expense 70 77 42 305 287


Corporate Services consists of Corporate Units and Technology and Operations (T&O). Corporate Units provide enterprise-wide expertise, governance

and support in a variety of areas, including strategic planning, risk management, finance, legal and regulatory compliance, human resources,

communications, marketing, real estate, procurement, data and analytics. T&O develops, monitors, manages and maintains governance of information

technology, and also provides cyber security and operations services.

The costs of these Corporate Units and T&O services are largely transferred to the three operating groups (Personal and Commercial Banking,

BMO Wealth Management and BMO Capital Markets), with any remaining amounts retained in Corporate Services results. As such, Corporate Services

results largely reflect the impact of residual treasury-related activities, the elimination of taxable equivalent adjustments, and residual unallocated

expenses.

Q3 2020 vs. Q3 2019

Corporate Services reported and adjusted net loss for the quarter were $118 million, compared with a reported and adjusted net loss of $25 million in

the prior year. Results decreased, primarily due to lower treasury-related revenue, reflecting higher levels of excess deposits, and higher expenses

driven by the impact of a gain on the sale of an office building in the prior year.

Q3 2020 vs. Q2 2020 Reported and adjusted net loss for the quarter were $118 million, compared with a reported and adjusted net loss of $81 million in the prior quarter.

Results decreased, primarily due to lower treasury-related revenue, reflecting higher levels of excess deposits, partially offset by the impact of an

unfavourable tax rate in the prior quarter and lower expenses in the current quarter.

Q3 YTD 2020 vs. Q3 YTD 2019 Reported and adjusted net loss were $305 million, compared with a reported and adjusted net loss of $181 million in the prior year. Results decreased,

primarily due to lower treasury-related revenue, reflecting higher levels of excess deposits, the impact of a less favourable tax rate in the current year,

higher provisions for credit losses and the impact of a gain on the sale of an office building in the prior year, partially offset by lower other expenses.

Adjusted results in this Corporate Services section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures section.


Summary Quarterly Earnings Trends (Canadian $ in millions, except as noted) Q3-2020 Q2-2020 Q1-2020 Q4-2019 Q3-2019 Q2-2019 Q1-2019 Q4-2018

Revenue (1)(2) 7,189 5,264 6,747 6,087 6,666 6,213 6,517 5,893

Insurance claims, commissions and changes in

policy benefit liabilities (CCPB) 1,189 (197) 716 335 887 561 926 390

Revenue, net of CCPB (1)(2) 6,000 5,461 6,031 5,752 5,779 5,652 5,591 5,503

Provision for (recovery of) credit losses on impaired loans 446 413 324 231 243 150 127 177

Provision for (recovery of) credit losses on performing loans 608 705 25 22 63 26 10 (2)

Total provision for credit losses 1,054 1,118 349 253 306 176 137 175

Non-interest expense (1)(2) 3,444 3,516 3,669 3,987 3,491 3,595 3,557 3,193

Income before income taxes 1,502 827 2,013 1,512 1,982 1,881 1,897 2,135

Provision for income taxes 270 138 421 318 425 384 387 438

Reported net income (see below) 1,232 689 1,592 1,194 1,557 1,497 1,510 1,697

Acquisition integration costs (3) 4 2 2 2 2 2 4 13

Amortization of acquisition-related intangible assets (4) 23 24 23 29 23 23 24 24

Restructuring costs (5) - - - 357 - - - -

Reinsurance adjustment (6) - - - 25 - - - -

Benefit from the remeasurement of an employee benefit liability (7) - - - - - - - (203)

Adjusted net income (see below) 1,259 715 1,617 1,607 1,582 1,522 1,538 1,531

Basic earnings per share ($) 1.81 1.00 2.38 1.79 2.34 2.27 2.28 2.58

Diluted earnings per share ($) 1.81 1.00 2.37 1.78 2.34 2.26 2.28 2.58

Adjusted diluted earnings per share ($) 1.85 1.04 2.41 2.43 2.38 2.30 2.32 2.32





(2) Effective the first quarter of 2019, the bank adopted IFRS 15, Revenue from Contracts with Customers (IFRS 15) and elected to retrospectively present prior periods as if IFRS 15 had always been applied.

As a result, loyalty rewards and cash promotion costs on cards previously recorded in non-interest expense are presented as a reduction in non-interest revenue. In addition, certain out-of-pocket expenses

reimbursed to BMO from customers have been reclassified from a reduction in non-interest expense to non-interest revenue.

(3) Acquisition integration costs before tax are included in non-interest expense.

(4) Amortization of acquisition-related intangible assets before tax is charged to the non-interest expense of the operating groups.

(5) Restructuring charges recorded in Q4-2019 of $357 million after-tax ($484 million pre-tax). Restructuring costs are included in non-interest expense in Corporate Services.

(6) Q4-2019 reported net income included a reinsurance adjustment of $25 million (pre-tax and after-tax) in CCPB, related to the net impact of major reinsurance claims from Japanese typhoons that were

incurred after our announced decision to wind down our reinsurance business. This reinsurance adjustment is included in CCPB in BMO Wealth Management.

(7) Q4-2018 included a benefit of $203 million after-tax ($277 million pre-tax) from the remeasurement of an employee benefit liability as a result of an amendment to our other employee future benefits plan

for certain employees that was announced in the fourth quarter of 2018. This amount has been included in Corporate Services in non-interest expense.

Certain comparative figures have been reclassified to conform with the current period’s presentation.


BMO’s quarterly earnings trends were reviewed in detail on pages 52 and 53 of BMO’s 2019 Annual Report. Please refer to that review for a more

complete discussion of trends and factors affecting past quarterly results, including the modest impact of seasonal variations in results. Quarterly

earnings are also impacted by foreign currency translation. The table above outlines summary results for the fourth quarter of fiscal 2018 through the

third quarter of fiscal 2020.

Earnings Trends BMO’s results in the most recent two quarters reflect the impact of the COVID-19 pandemic, with higher provisions for credit losses recorded in our

P&C businesses and BMO Capital Markets, market sensitive businesses impacted by market conditions and the impact of lower interest rates. Revenue

performance in our market sensitive businesses has improved from the previous quarter. Our P&C businesses recorded good year-over-year balance

growth, but have been impacted by lower margins due to the lower rate environment. Prior to the last two quarters, BMO’s underlying results have

generally trended upwards.

Reported results over the past eight quarters were impacted by a restructuring charge and a reinsurance adjustment, both in the fourth quarter

of 2019, as well as a benefit from the remeasurement of an employee future benefit liability in the fourth quarter of 2018.

Canadian P&C delivered year-over-year loan and deposit growth, and focused expense management. Revenue in the second and third quarters

of 2020 was negatively impacted by the lower rate environment. U.S. P&C delivered year-over-year revenue growth in the past eight quarters, with

year-over-year growth in loan and deposit balances, as well as continued expense management. Traditional Wealth Management results have

generally seen moderate increases. The current quarter results reflect the impact of improved equity markets, while the second quarter of 2020 was

impacted by weaker markets and a legal provision. Insurance results are subject to variability resulting from changes in interest rates, equity markets

and reinsurance claims. Performance in BMO Capital Markets over the past eight quarters generally reflected good revenue performance, due to strong

U.S. segment performance and benefits from our diversified businesses, with the exception of the second quarter of 2020, which was negatively

impacted by market conditions resulting from the COVID-19 pandemic. Results in the second quarter of 2019 included a severance expense. Corporate

Services reported results can fluctuate quarter-over-quarter, in large part due to the inclusion of adjusting items, which are largely recorded in

Corporate Services.

The bank’s results reflect the impact of IFRS 16, Leases (IFRS 16), which was adopted in the first quarter of 2020, and IFRS 15, Revenue from

Contracts with Customers (IFRS 15), which was adopted retrospectively in the first quarter of 2019. Please refer to the Changes in Accounting Policies

section on page 34 and on pages 142 to 146 of BMO’s 2019 Annual Report.

BMO’s total provision for credit losses measured as a percentage of net loans and acceptances has ranged between 13 basis points and 31 basis

points between the fourth quarter of 2018 and first quarter of 2020. Since the World Health Organization declared COVID-19 a global pandemic on

March 11, 2020, the bank recognized elevated credit losses. Our total provision for credit losses was 94 basis points in second quarter of 2020

and 89 basis points in third quarter of 2020.


The effective tax rate has varied with legislative changes; changes in tax policy, including their interpretation by tax authorities and the courts;

earnings mix, including the relative proportion of earnings attributable to the different jurisdictions in which we operate; and the level of tax-exempt

income from securities.

Adjusted results in this Summary Quarterly Earnings Trends section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP

Measures section. See also the Impact of COVID-19 and Risk Management sections.

Balance Sheet Total assets were $973.5 billion as at July 31, 2020, an increase of $121.3 billion from October 31, 2019. The stronger U.S. dollar at quarter-end

increased assets by $6.9 billion, excluding the impact on derivative financial assets. The following discussion excludes the impact of changes in the

U.S. dollar.

Net loans and acceptances increased $10.7 billion. Business and government loans and acceptances increased $9.3 billion with higher balances

across all operating groups and includes government relief facilities related to the impact of COVID-19. Consumer instalment and other personal loans

increased $1.2 billion, due to growth in our P&C businesses, reflecting government relief facilities related to the impact of COVID-19, and

BMO Wealth Management. Residential mortgages increased $1.6 billion, due to growth in Canadian P&C, partially offset by lower balances in U.S. P&C.

Securities increased $36.8 billion, primarily due to strong customer deposit growth in excess of loan growth and higher client activity in

BMO Capital Markets. Cash and cash equivalents and interest bearing deposits with banks increased $27.2 billion, due to higher balances held with

central banks, primarily as a result of strong customer deposit growth in excess of loan growth. Securities borrowed or purchased under resale

agreements increased $13.7 billion, primarily due to higher client activity in BMO Capital Markets. All other assets, excluding derivative financial assets,

increased $9.4 billion, primarily driven by higher cash collateral requirements on over-the-counter derivative transactions and the adoption of

IFRS 16, Leases, which resulted in the recording of a right-of-use asset and lease liability on the balance sheet.

Liabilities increased $117.8 billion from October 31, 2019. The stronger U.S. dollar increased liabilities by $6.2 billion, excluding the impact on

derivative financial liabilities. The following discussion excludes the impact of changes in the U.S. dollar.

Deposits increased $87.8 billion. Business and government deposits increased $51.4 billion, primarily due to growth in customer balances across

the operating groups, which in part reflects the higher amount of liquidity retained by our customers due to the impact of COVID-19. Deposits by

individuals increased $18.6 billion, due to growth in the P&C businesses and BMO Wealth Management. Deposits by banks increased $17.8 billion,

primarily due to participation in the Bank of Canada’s term repo facility.

Securities lent or sold under repurchase agreements increased $12.2 billion, driven by client activity in BMO Capital Markets and participation in the

Bank of Canada’s secured term repo facility. Securities sold but not yet purchased increased $4.2 billion, driven by client activity in BMO Capital Markets.

Customers’ liability under acceptances decreased $5.6 billion, as a result of fewer bankers’ acceptances being issued into the market. Subordinated

debt increased $1.5 billion, primarily due to an issuance in the quarter. All other liabilities, excluding derivative financial liabilities, decreased

$4.8 billion, primarily due to lower secured funding, partially offset by the impact of the adoption of IFRS 16, Leases.

Derivative financial assets increased $16.7 billion and derivative financial liabilities increased $16.3 billion, including the impact of changes in the

U.S. dollar, primarily due to an increase in the value of client-driven trading derivatives in BMO Capital Markets. The increase was primarily due to the

impact of lower interest rates, strengthening of the U.S. dollar, volatility in equity markets and lower oil prices.

Total equity increased $3.5 billion from October 31, 2019. Accumulated other comprehensive income increased $2.1 billion, primarily due to the

impact of lower interest rates on cash flow hedges and the impact of the stronger U.S. dollar on the translation of net foreign operations. Retained

earnings increased $1.2 billion, as a result of net income earned in the current year, partially offset by dividends and distributions on other equity

instruments, as well as the impact of the adoption of IFRS 16, Leases on the opening balance.

Contractual obligations by year of maturity are outlined on page 43 of this Report to Shareholders.

Please see the Impact of COVID-19 and Risk Management sections.


Transactions with Related Parties In the ordinary course of business, we provide banking services to our key management personnel on the same terms that we offer to our preferred

customers for those services. Key management personnel are defined as those persons having authority and responsibility for planning, directing

and/or controlling the activities of an entity, being the directors and most senior executives of the bank. We provide banking services to our joint

ventures and equity-accounted investees on the same terms offered to our customers for these services.

The bank’s policies and procedures for related party transactions did not materially change from October 31, 2019, as described in Note 27 to the

audited consolidated financial statements on page 204 of BMO’s 2019 Annual Report.

Select Financial Instruments and Off-Balance Sheet Arrangements The Financial Stability Board (FSB) issued a report in 2012, encouraging enhanced disclosure related to financial instruments that market participants

had come to regard as carrying higher risk. An index of where the disclosures recommended by the Enhanced Disclosure Task Force (EDTF) of the FSB

are located is provided on our website at www.bmo.com/investorrelations. We follow a practice of reporting on significant changes in select financial

instruments since year end, if any, in our interim MD&A. There have been no material changes from the disclosure on page 66 in our 2019 Annual

Report.

We also enter into a number of off-balance sheet arrangements in the normal course of operations. The most significant of these are credit

instruments, structured entities and guarantees, which are described on page 67 of BMO’s 2019 Annual Report. We consolidate all of our structured

entities, except for our Canadian customer securitization vehicles, structured finance vehicles, certain capital and funding vehicles, as well as various

BMO-managed and non-managed investment funds. There have been no significant changes to the bank’s off-balance sheet arrangements since

October 31, 2019, with the exception of our participation in certain government programs that were launched in the second quarter of 2020.

These government offered programs were launched to support businesses facing economic hardship due to the outbreak, including the Canada

Emergency Business Account (CEBA) Program. Under the CEBA Program, we issue loans that are funded by the government. We assessed whether

substantially all the risks and rewards of the loans were transferred to the government and determined they qualify for derecognition, therefore we do

not record these loans on the Consolidated Balance Sheet.

Accounting Policies and Critical Accounting Estimates Significant accounting policies are described in our 2019 Annual Report and in the notes to our audited consolidated financial statements for the year

ended October 31, 2019, and in Note 1 to the unaudited interim consolidated financial statements, together with a discussion of certain accounting

estimates that are considered particularly important as they require management to make significant judgments, some of which relate to matters that

are inherently uncertain. Readers are encouraged to review that discussion on pages 107 to 111 and 142 to 146 in BMO’s 2019 Annual Report, as well

as the updates provided in Note 1 to the unaudited interim consolidated financial statements.

The preparation of the consolidated financial statements requires management to use estimates and assumptions that affect the carrying amounts

of certain assets and liabilities, certain amounts reported in net income and other related disclosures. The most significant assets and liabilities for

which we must make estimates include allowance for credit losses; financial instruments measured at fair value; pension and other employee future

benefits; impairment of securities; income taxes and deferred tax assets; goodwill and intangible assets; insurance-related liabilities; and provisions. If

actual results were to differ from the estimates, the impact would be recorded in future periods.

The full extent of the impact that COVID-19, including government and/or regulatory responses to the outbreak, will have on the Canadian and U.S.

economies and the bank’s business remains uncertain and difficult to predict at this time. By their very nature, the judgments and estimates we make

for the purposes of preparing our financial statements relate to matters that are inherently uncertain. However, we have detailed policies and internal

controls that are intended to ensure these judgments and estimates are well controlled, independently reviewed, and our policies are consistently

applied from period to period. We believe that our estimates of the value of our assets and liabilities are appropriate as at July 31, 2020.

Allowance for Credit Losses The allowance for credit losses (ACL) consists of allowances on impaired loans, which represent estimated losses related to impaired loans in the

portfolio provided for but not yet written off, and allowances on performing loans, which is our best estimate of impairment in the existing portfolio

for loans that have not yet been individually identified as impaired. Expected credit losses (ECL) are calculated on a probability-weighted basis, based

on the economic scenarios described below, and are calculated for each exposure in the portfolio as a function of the probability of default (PD),

exposure at default (EAD) and loss given default (LGD), with the timing of the loss also considered. Where there has been a significant increase in

credit risk, lifetime ECL is recorded; otherwise 12 months of ECL is generally recorded. Significant increase in credit risk takes into account many

different factors and will vary by product and risk segment. The main factors considered in making this determination are the change in PD since

origination and certain other criteria, such as 30-day past due and watchlist status. In cases where borrowers have opted to participate in payment

deferral programs we offered as a result of the COVID-19 pandemic, deferred payments are not considered to be past due and do not on their own

indicate a significant increase in credit risk. We may apply experienced credit judgment to reflect factors not captured in the ECL models as we deem

necessary. In Q3 2020, we have applied experienced credit judgment to reflect the impact of the extraordinary and highly uncertain environment on

credit conditions and the economy. For additional information, refer to pages 107 to 108, Note 4 of our audited annual consolidated financial

statements on pages 151 to 158 of BMO’s 2019 Annual Report and Note 3 of our unaudited interim consolidated financial statements on page 55.

http://www.bmo.com/investorrelations


Our total allowance for credit losses as at July 31, 2020, was $3,707 million ($2,094 million as at October 31, 2019), comprised of an allowance on

performing loans of $2,976 million and an allowance on impaired loans of $731 million ($1,609 million and $485 million, respectively, as at

October 31, 2019). The allowance on performing loans increased $1,367 million from the fourth quarter of 2019, primarily driven by the

macroeconomic outlook, portfolio migration and changes in scenario weighting.

In establishing our allowance for performing loans, we attach probability weightings to three economic scenarios, which are representative of our

view of forecast economic and market conditions – a base scenario, which in our view represents the most probable outcome, as well as benign and

adverse scenarios, all developed by our Economics group, based on our outlook at the end of the quarter, in accordance with IFRS principles.

As at July 31, 2020, our base case economic forecast depicts a contracting Canadian economy, with real GDP falling 6.0% in 2020, as a result of a

sharp decline in the first half of the year. This contraction is largely due to continued severe dislocations caused by COVID-19, however, the economy is

expected to rebound 6.0% in 2021 as the outbreak is brought under control. The Canadian unemployment rate is forecasted to increase to an average

of 9.5% in 2020, up from 5.7% in 2019, and improve to an average of 8.0% in 2021. The U.S. economy follows a similar trajectory with U.S. real GDP

forecast to decline 5.5% in 2020, before growing 5.0% in 2021. The U.S. unemployment rate is forecast to increase to an average of 8.9% in 2020,

compared with 3.7% in 2019, before falling to an average of 7.0% in 2021. This is in contrast to our base case economic forecast as at

October 31, 2019, which depicted moderate economic growth in both Canada and the United States over the projection period. In addition, the outlook

for the economy and labour markets is moderately weaker, compared with expectations in the second quarter of 2020. If we assume a 100% base

case economic forecast and include the impact of loan migration by restaging, with other assumptions held constant, including the application of

experienced credit judgment, the allowance on performing loans would be approximately $2,725 million as at July 31, 2020 ($1,325 million as at

October 31, 2019), compared with the reported allowance on performing loans of $2,976 million ($1,609 million as at October 31, 2019).

As at July 31, 2020, our adverse case economic forecast also depicts a contracting Canadian economy, with real GDP declining 7.6% in 2020, with

an increase of 3.7% in 2021. In our adverse case scenario, the dislocations caused by the pandemic are more significant and persist for a longer period

of time, compared with our base case scenario. The Canadian unemployment rate averages 10.9% in 2020 and 10.0% in 2021. U.S. real GDP

declines 7.1% in 2020 and rebounds 2.5% in 2021. The U.S. unemployment rate averages 10.3% in 2020 and decreases to an average of 8.9% in 2021.

This is in contrast to the adverse scenario forecast as at October 31, 2019, which depicted a typical recession with the economy contracting 3% in the

first year followed by a steady recovery through the end of the projection period. If we assume a 100% adverse economic forecast and include the

impact of loan migration by restaging, with other assumptions held constant, including the application of experienced credit judgment, the allowance

on performing loans would be approximately $3,550 million as at July 31, 2020 ($2,800 million as at October 31, 2019), compared with the reported

allowance on performing loans of $2,976 million ($1,609 million as at October 31, 2019).

The following table shows the key economic variables we used to estimate our allowance on performing loans during the forecast period. This

table is typically provided on an annual basis, however, given the significant level of change in the forward-looking information since the end of 2019,

the disclosures have been provided as an update to information in BMO’s 2019 Annual Report. The values shown represent the national annual

average values for calendar 2020 and calendar 2021. The base case scenario reflects our view of the most probable outcome. Our forecast in Q3 2020

is moderately weaker from our initial view of the pandemic’s impacts during 2020, with real GDP now forecast to contract 5.5% in the United States

reflecting the recent downturn, and our forecast real GDP for Canada staying constant from last quarter. We still expect the economy to recover during

the remainder of 2020 in all three scenarios, continuing through 2021, with support from substantial policy stimulus. Unemployment rates are higher

throughout the three scenarios as a result of the initial recession, compared with both October 31, 2019 and April 30, 2020. While the values disclosed

below are national variables, we use regional variables in our underlying models where considered appropriate and consider factors impacting

particular industries.

Benign scenario Base scenario Adverse scenario (1)

All figures are average

annual values

2020 2021 2020 2021 2020 2021

July 31, 2020

October 31, 2019

July 31, 2020

October 31, 2019

July 31, 2020

October 31, 2019

July 31, 2020

October 31, 2019

July 31, 2020

October 31, 2019

July 31, 2020

October 31, 2019

Real gross domestic product (2)

Canada (4.6)% 2.9% 8.9% 2.5% (6.0)% 1.7% 6.0% 1.6% (7.6)% (2.3)% 3.7% 0.5%

United States (4.1)% 2.4% 7.8% 2.4% (5.5)% 1.8% 5.0% 1.9% (7.1)% (2.0)% 2.5% 0.6%

Corporate BBB 10-year spread

Canada 2.1% 2.0% 1.9% 2.1% 2.4% 2.3% 2.3% 2.3% 2.8% 4.5% 3.1% 4.1%

United States 2.2% 1.8% 1.9% 2.0% 2.5% 2.3% 2.4% 2.4% 3.0% 4.1% 3.2% 3.6%

Unemployment rates

Canada 8.5% 5.1% 6.5% 5.0% 9.5% 5.7% 8.0% 5.9% 10.9% 8.5% 10.0% 9.0%

United States 7.5% 3.3% 5.4% 3.2% 8.9% 3.7% 7.0% 3.8% 10.3% 6.1% 8.9% 6.8%

Housing price index (HPI) (2)

Canada (3) 5.3% 3.7% 5.4% 3.7% 3.5% 2.0% 0.0% 2.5% 0.8% (12.3)% (7.5)% (4.7)%

United States (4) 2.4% 4.4% 4.6% 4.2% 1.0% 3.0% 1.6% 2.7% (0.4)% (5.7)% (1.9)% (2.2)%

(1) In Q4 2019, the adverse scenario was reflective of a typical recession that extends for four quarters. However, beginning Q2 2020 , the adverse scenario used is reflective of a more adverse outcome compared

with our base case forecast.

(2) Real gross domestic product and housing price index are year-over-year growth rates.

(3) In Canada, we use the HPI Benchmark Composite.

(4) In the United States, we use the National Case-Shiller House Price Index.


Real GDP is an important determinant for many of the key economic and market variables in our ECL models, although the allowance is not sensitive to

this variable alone. The table shows how we expect the real GDP year-over-year growth rate for the base case in Canada and the United States to

trend by calendar quarter, with the immediate sharp downturn and subsequent recovery. In addition, the table includes the real GDP level, compared

with the calendar quarter Q4 2019, expressed as a percentage.

Calendar quarter ended June 30,

2020 September 30,

2020 December 31,

2020 March 31,

2021 June 30,

2021 September 30,

2021 December 31,

2021 March 31,

2022

Real gross domestic product growth rates year-over-year

Canada (13.5)% (5.8)% (3.7)% 0.1% 14.9% 5.9% 4.1% 2.8%

United States (12.2)% (5.7)% (4.6)% (1.9)% 12.8% 5.5% 4.6% 3.8% Real gross domestic product level compared to calendar Q4 2019

Canada 86.2% 94.1% 96.3% 98.0% 99.0% 99.6% 100.2% 100.7%

United States 86.9% 93.8% 95.4% 96.8% 98.1% 99.0% 99.8% 100.5%

The ECL approach requires the recognition of credit losses generally based on 12 months of expected losses for performing loans (Stage 1) and the

recognition of lifetime expected losses for performing loans that have experienced a significant increase in credit risk since origination (Stage 2). Under

our current probability-weighted scenarios and based on the current risk profile of our loan exposures, if all our performing loans were in Stage 1, our

allowance for performing loans would be approximately $2,300 million ($1,050 million as at October 31, 2019), compared with the reported

allowance for performing loans of $2,976 million ($1,609 million as at October 31, 2019).

Information on the Provision for Credit Losses for the three and nine months ending July 31, 2020, can be found on page 12 of this MD&A.

This Allowance for Credit Losses section contains forward-looking statements. Please refer to the Caution Regarding Forward-Looking Statements

section. See also the Impact of COVID-19 and Risk Management sections.

Transfer of Assets We sell Canadian mortgage loans to third-party Canadian securitization programs, including the Insured Mortgage Purchase Program (IMPP) launched

in the second quarter by the Government of Canada, as part of their response to COVID-19. We assess whether substantially all of the risks and rewards

of the loans have been transferred, in order to determine if they qualify for derecognition. Since we continue to be exposed to substantially all of the

risks and rewards of ownership associated with these securitized mortgages, they do not qualify for derecognition. We continue to recognize the loans

and recognize the related cash proceeds as secured financing in our Consolidated Balance Sheet.

Financial Instruments Measured at Fair Value

We record assets and liabilities classified as trading, assets and liabilities designated at fair value, derivatives, certain equity and debt securities and

securities sold but not yet purchased at fair value. Fair value represents our estimate of the amount we would receive or would be required to pay in

the case of a liability, in an orderly transaction between willing parties at the measurement date. The fair value amounts disclosed represent point-in-

time estimates that may change in subsequent reporting periods due to changes in market conditions or other factors. Some financial instruments are

not typically exchangeable or exchanged and therefore it is difficult to determine their fair value. Where there is no quoted market price, we

determine fair value using management’s best estimates based on a range of valuation techniques and assumptions; since these involve uncertainties,

the fair values may not be realized in an actual sale or immediate settlement of the asset or liability. For instruments that are valued using models, we

consider all reasonable available information and maximize the use of observable market data. When we determine that the model estimates do not

reflect fair value, we incorporate certain adjustments to establish fair values. These fair value adjustments take into account the estimated impact of

credit risk, liquidity risk and other items, including closeout costs, market volatility and bid-offer spreads. For example, the credit risk valuation

adjustment for derivative financial instruments incorporates credit risk into our determination of fair values by taking into account factors such as the

counterparty’s credit rating, the duration of the instrument and changes in credit spreads. We also incorporate an estimate of the implicit funding costs

borne by BMO for over-the-counter derivative positions (the funding valuation adjustment).

We have considered the current market conditions due to COVID-19 and their impact on the determination of fair value, applying judgment in the

selection of inputs where applicable.

Caution This Accounting Policies and Critical Accounting Estimates section contains forward-looking statements. Please refer to the Caution Regarding Forward-

Looking Statements.


Changes in Accounting Policies IFRS 16, Leases Effective November 1, 2019, we adopted IFRS 16, Leases (IFRS 16), which provides guidance whereby lessees are required to recognize a liability for

the present value of future lease payments and record a corresponding asset on the balance sheet for most leases. The impact to our Equipment

Finance and Transportation Finance businesses are minimal. The most significant impact for the bank is the recording of real estate leases on the

balance sheet. Previously, most of our real estate leases were classified as operating leases, whereby we recorded the lease expense over the lease

term with no asset or liability recorded on the balance sheet other than related leasehold improvements. On adoption, we elected to exclude

intangibles from the scope of lease accounting.

On transition, we chose to recognize the cumulative effect of adoption of IFRS 16 in opening retained earnings with no changes to prior periods.

Interbank Offered Rate (IBOR) Reform Effective November 1, 2019, we early adopted the Phase 1 amendments to IAS 39, Financial Instruments: Recognition and Measurement and

IFRS 7, Financial Instruments: Disclosures. The amendments provide relief from the uncertainty arising from IBOR reform during the period prior to

replacement of IBORs. The amendments modify certain hedge accounting requirements, allowing us to assume the interest rate benchmark on which

the cash flows of the hedged item and the hedging instrument are based are not altered as a result of IBOR reform, thereby allowing hedge

accounting to continue. They also provide an exception from the requirement to discontinue hedge accounting if a hedging relationship does not meet

the effectiveness requirements as a result of IBOR reform.

Mandatory application of the amendments ends at the earlier of when the uncertainty regarding the timing and amount of interest rate

benchmark-based cash flows is no longer present and the discontinuation of the hedging relationship.

Effective November 1, 2019, we also adopted IFRS Interpretations Committee Interpretation 23, Uncertainty over income tax treatments (IFRIC 23),

which had no impact on our financial results upon adoption.

Note 1 to the unaudited interim consolidated financial statements provides further details on the impact of adoption of IFRIC 23 and the other new

standards, including IFRS 16 and IBOR Reform.

Future Changes in Accounting Policies We monitor the potential changes proposed by the International Accounting Standards Board (IASB) and analyze the effect that changes in the

standards may have on BMO’s financial reporting and accounting policies. Information on new standards and amendments to existing standards, which

are effective for the bank in the future, can be found on page 111 and in Note 1 to the audited annual consolidated financial statements on page 146

of BMO’s 2019 Annual Report, and in Note 1 to the unaudited interim consolidated financial statements on page 52.

IFRS 17, Insurance Contracts In June 2020, the IASB issued amendments to IFRS 17, Insurance Contracts (IFRS 17). The amendments include a deferral for the effective date of

IFRS 17, resulting in a new adoption date for the bank of November 1, 2023 instead of November 1, 2022. It also includes amendments to simplify and

revise certain requirements, as well as provide additional transition relief. We continue to assess the impact of the standard on our future financial

results. Further information on these amendments can be found in Note 1 to the unaudited interim consolidated financial statements on page 52.

Other Regulatory Developments We continue to monitor and prepare for regulatory developments, including those referenced elsewhere in this Report to Shareholders.

For a comprehensive discussion of regulatory developments, see the Enterprise-Wide Capital Management section starting on page 59, the

Risks That May Affect Future Results section starting on page 68, the Liquidity and Funding Risk section starting on page 91, and the Legal and

Regulatory Risk section starting on page 103 of BMO’s 2019 Annual Report.

This Other Regulatory Developments section contains forward-looking statements. Please refer to the Caution Regarding Forward-Looking

Statements.


Risk Management Our risk management policies and processes to identify, measure, manage, monitor, mitigate and report our credit and counterparty, market,

insurance, liquidity and funding, operational, including technology and cyber-related risks, legal and regulatory, business, strategic, environmental and

social, and reputation risks, have not changed significantly from those outlined in the Enterprise-Wide Risk Management section on pages 68 to 106 of

BMO’s 2019 Annual Report.

Top and Emerging Risks that May Affect Future Results BMO’s top and emerging risks and other factors that may affect future results are described on pages 68 to 71 of BMO’s 2019 Annual Report. The

following is an update to the 2019 Annual Report.

COVID-19 Pandemic Related Risks

The World Health Organization declared COVID-19 a global pandemic on March 11, 2020. The COVID-19 pandemic has had, and will likely continue to

have a negative impact on the global economy and economic outlook, including with respect to the jurisdictions in which we operate, resulting in

lower economic output, increased unemployment levels and lower interest rates. Government and regulatory measures, such as temporary closures of

businesses, the institution of social distancing and other measures have been relaxed in certain of the jurisdictions in which we operate. However,

other jurisdictions have reinstated measures due to subsequent spikes in COVID-19 infections. Actions taken by governments, monetary authorities and

regulators to support the economy and financial system, including fiscal and monetary measures to increase liquidity and support incomes, as well as

regulatory actions in respect of financial institutions, generally remained in place, though there is uncertainty regarding how much longer these actions

and measures will stay in effect.

The pandemic has had a negative impact on the bank’s earnings in the current and prior quarter, including increased provisions for credit loan

losses on both impaired and performing loans, and lower net interest margins. BMO continues to monitor the impacts of the COVID-19 pandemic on its

credit portfolio. The COVID-19 pandemic has resulted in negative migration across the portfolio, particularly in certain sectors that are considered more

vulnerable to the pandemic. In order to assist our clients, we have been working closely with governments and agencies to implement programs to

reduce the financial hardship caused by COVID-19, including offering payment deferrals and lending facilities designed to help individuals and

businesses to withstand stress and recover. During the quarter, commercial payment deferrals declined, with outstanding commercial deferrals by

balance approximately half of those recorded in Q2 2020. Overall, the large majority of these clients resumed payments with only a small percentage

having their payment relief term extended. Almost all of the remaining initial payment deferrals offered to our business clients are expected to expire

in Q4 2020. For consumer payment deferrals, we saw high rates of payment resumption from those payment deferrals that matured during the quarter.

The majority of consumer payment deferrals will expire in Q4 2020 and the maturities are being closely monitored and actively managed.

If the COVID-19 pandemic is prolonged, the negative impact on the global economy could deepen from what is now expected. It could continue to

disrupt global supply chains, lower equity market valuations and interest rates, create significant volatility and disrupt financial markets, and further

increase unemployment and business bankruptcies. The bank’s net interest income would likely be impacted should interest rates decrease from

current low levels and the demand for our products and services may be significantly reduced. In the event the COVID-19 pandemic is prolonged, the

bank would expect to continue to recognize elevated credit losses in our loan portfolios, including in those industries directly impacted by the

pandemic and in our retail portfolios given higher unemployment. We could also experience mark-to-market losses in our trading business for several

reasons, including heightened market volatility and a deterioration in the financial condition of counterparties, and other parties relevant to our

business. As a result of changing economic and market conditions, we may be required to recognize impairments in future periods on the securities or

other assets we hold, as well as reductions in other comprehensive income. In addition, in certain businesses, including our equity linked notes related

businesses where we sell investment products that have returns tied to equity securities, we have exposure to the dividend policies of the companies

that issue those underlying equity securities. Our business operations may also be disrupted if our key suppliers of goods and services are adversely

impacted or significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other

restrictions in connection with the pandemic. The pandemic may also impact our ability to access capital markets, our liquidity and capital position, or

may result in downgrades in our credit ratings. The COVID-19 pandemic has resulted in an increase, and may result in further increases, in certain of

the risks outlined in the Enterprise-Wide Risk Management section on pages 68 to 106 of BMO’s 2019 Annual Report, including BMO’s top and

emerging, credit and counterparty, market, insurance, liquidity and funding, operational, including technology and cyber-related, legal and regulatory,

business, strategic, environmental and social, and reputation risk. We may also face increased risk of litigation and governmental and regulatory

scrutiny, as a result of the effects of the COVID-19 pandemic on market and economic conditions and actions governmental authorities take in response

to those conditions.

The extent to which the COVID-19 pandemic continues to impact our operations and financial performance and condition will depend on future

developments, which are highly uncertain and cannot be predicted, including the scope, severity and duration of the pandemic and actions taken by

governmental and regulatory authorities, which could vary by country, and other third parties in response to the pandemic.

Further discussion of the pandemic can be found in the Impact of COVID-19 section on page 8.

Oil and Gas Industry Outlook

Though oil prices have improved from their low levels in the prior quarter, they still remain below price levels prior to the pandemic. Our exposure in

this sector is relatively modest, relative to our total loan portfolio, with oil and gas gross loans and acceptances of $14 billion, representing 3% of total

loans. We continue to closely monitor all segments in this industry.


Market Risk BMO’s market risk management practices and key measures are outlined on pages 86 to 90 of BMO’s 2019 Annual Report.

Linkages between Balance Sheet Items and Market Risk Disclosures The table below presents items reported in our Consolidated Balance Sheet that are subject to market risk, comprised of balances that are subject to

either traded risk or non-traded risk measurement techniques.

Linkages between Balance Sheet Items and Market Risk Disclosures As at July 31, 2020 As at October 31, 2019

Consolidated Subject to market risk Not subject Consolidated Subject to market risk Not subject Primary risk factors for

Balance Traded Non-traded to market Balance Traded Non-traded to market non-traded risk

(Canadian $ in millions) Sheet risk (1) risk (2) risk Sheet risk (1) risk (2) risk balances

Assets Subject to Market Risk Cash and cash equivalents 76,590 - 76,590 - 48,803 - 48,803 - Interest rate

Interest bearing deposits with banks 8,364 99 8,265 - 7,987 242 7,745 - Interest rate

Securities 227,905 89,089 138,816 - 189,438 85,739 103,699 - Interest rate, credit spread, equity

Securities borrowed or purchased

under resale agreements 118,713 - 118,713 - 104,004 - 104,004 - Interest rate

Loans (net of allowance

for credit losses) 445,328 - 445,328 - 426,094 - 426,094 - Interest rate, foreign exchange

Derivative instruments 38,796 33,379 5,417 - 22,144 19,508 2,636 - Interest rate, foreign exchange

Customer's liabilities

under acceptances 18,032 - 18,032 - 23,593 - 23,593 - Interest rate

Other assets (3) 39,780 4,716 17,697 17,367 30,132 1,719 13,698 14,715 Interest rate

Total Assets 973,508 127,283 828,858 17,367 852,195 107,208 730,272 14,715

Liabilities Subject to Market Risk Deposits 660,600 17,467 643,133 - 568,143 15,829 552,314 - Interest rate, foreign exchange

Derivative instruments 39,859 35,297 4,562 - 23,598 20,094 3,504 - Interest rate, foreign exchange

Acceptances 18,032 - 18,032 - 23,593 - 23,593 - Interest rate

Securities sold but not yet

purchased 30,579 30,579 - - 26,253 26,253 - -

Securities lent or sold under

repurchase agreements 99,854 - 99,854 - 86,656 - 86,656 - Interest rate

Other liabilities (3) 61,484 - 61,345 139 65,881 - 65,766 115 Interest rate

Subordinated debt 8,513 - 8,513 - 6,995 - 6,995 - Interest rate

Total Liabilities 918,921 83,343 835,439 139 801,119 62,176 738,828 115

(1) Primarily comprised of balance sheet items that are subject to the trading and underwriting risk management framework and fair valued through profit or loss.

(2) Primarily comprised of balance sheet items that are subject to the structural balance sheet and insurance risk management framework.

(3) Effective the first quarter of 2020, the bank adopted IFRS 16, Leases (IFRS 16). As at July 31, 2020, we recognized a total right-of-use asset in other assets of $1,931 million, with a corresponding lease liability

of $2,112 million in other liabilities. Refer to the Changes in Accounting Policies section on page 34 for further details.



Trading and Underwriting Market Risk Average Total Trading Value at Risk (VaR) increased quarter-over-quarter, as the current quarter was the first full quarter to incorporate the historical

market volatility from the COVID-19 crisis that began in the middle of the prior quarter. This impact counteracted a reduction in equity and fixed

income positions during the quarter. The quarter-over-quarter decrease in Average Total Trading Stressed VaR (SVaR) reflects the decline in equity and

fixed income risk positions, as it captures a more constant level of market volatility. During the quarter, the SVaR period changed from the 2008

financial crisis to the 2020 COVID-19 crisis. Total Trading Value at Risk (VaR) and Trading Stressed Value at Risk (SVaR) Summary (1)(2)(3) For the quarter ended July 31, 2020 April 30, 2020 July 31, 2019

(Pre-tax Canadian $ equivalent in millions) Quarter-end Average High Low Average Average

Commodity VaR 4.2 2.8 4.2 1.9 1.7 1.3

Equity VaR 23.1 20.6 34.5 14.6 17.5 3.9

Foreign exchange VaR 3.6 4.2 6.4 2.9 3.2 0.4

Interest rate VaR (4) 39.1 28.3 39.6 22.6 16.4 7.8

Debt-specific risk 4.5 5.7 7.6 4.0 2.5 1.5

Diversification (29.5) (23.8) nm nm (12.1) (7.2)

Total Trading VaR 45.0 37.8 53.3 25.8 29.2 7.7

Total Trading SVaR 45.0 53.4 67.8 29.2 62.7 24.2

(1) One-day measure using a 99% confidence interval. Benefits are presented in parentheses and losses are presented as positive numbers.

(2) Stressed VaR is produced weekly and at month end.

(3) In Q1-2020, a new measurement approach was used for VaR and SVaR, which split the previously reported credit VaR into interest rate VaR for general credit spread risk and for debt-specific risk. Results in

prior quarters have been provided for comparability. In addition, the Total Trading VaR and SVaR no longer recognize diversification benefits from debt-specific risk.

(4) Interest rate VaR includes general credit spread risk.

nm - not meaningful

Structural (Non-Trading) Market Risk Structural economic value exposure to rising interest rates remained relatively unchanged, relative to April 30, 2020. Structural economic value benefit

to falling interest rates decreased relative to April 30, 2020, due to the reduced extent to which interest rates can now fall. Structural earnings benefit

to rising interest rates decreased relative to April 30, 2020, as fewer net assets are scheduled to reprice over the next 12 months. Structural earnings

exposure to falling interest rates decreased relative to April 30, 2020, due to fewer net assets scheduled to reprice over the next 12 months and the

reduced extent to which interest rates can now decline.

Structural Balance Sheet Earnings and Value Sensitivity to Changes in Interest Rates (1)(2)(3)

Economic value sensitivity Earnings sensitivity over the next 12 months

(Pre-tax Canadian $ equivalent in millions) July 31, 2020 April 30, 2020 July 31, 2019 July 31, 2020 April 30, 2020 July 31, 2019

100 basis point increase (984.4) (908.7) (886.5) 131.9 180.6 42.1

25/100 basis point decrease 45.9 114.9 (39.9) (51.1) (72.1) (126.3)

(1) Losses are in parentheses and benefits are presented as positive numbers.

(2) Owing to the low interest rate environment starting April 30, 2020 economic value sensitivity and earning sensitivity to declining interest rates are measured using a 25 basis point decline, while prior periods

reflect a 100 basis point decline.

(3) Insurance market risk includes interest rate and equity market risk arising from BMO's insurance business activities. A 100 basis point increase in interest rates as at July 31, 2020, would result in an increase in

earnings before tax of $49 million ($42 million as at April 30, 2020 and $27 million as at October 31, 2019). A 25 basis point decrease in interest rates as at July 31, 2020, would result in a decrease in

earnings before tax of $12 million ($11 million as at April 30, 2020 under a 25 basis point decrease and $25 million as at October 31, 2019 under a 100 basis point decrease). On an unhedged basis, a 10%

decrease in equity market values as at July 31, 2020, would result in a decrease in earnings before tax of $65 million ($56 million as at April 30, 2020 and $57 million as at October 31, 2019). A 10% increase

in equity market values as at July 31, 2020, would result in an increase in earnings before tax of $66 million ($57 million as at April 30, 2020 and $54 million as at October 31, 2019). BMO may enter into

hedging arrangements to offset the impact of changes in equity market values on its earnings, and did so during the 2020 fiscal year. The impact of insurance market risk on earnings is reflected in insurance

claims, commissions and changes in policy benefit liabilities on the Consolidated Statement of Income, and the corresponding change in the fair value of our policy benefit liabilities is reflected in other

liabilities on the Consolidated Balance Sheet. The impact of insurance market risk is not reflected in the table above.


Liquidity and Funding Risk Liquidity and funding risk is managed under a robust risk management framework. This framework enabled BMO to effectively manage the liquidity

and funding impacts of the COVID-19 pandemic that began in the second quarter of 2020.

BMO continued to maintain a strong liquidity position in the third quarter. The bank experienced strong customer deposit inflows in the third

quarter, building on the momentum observed in the second quarter, while customer loans declined. Wholesale funding declined as the bank repaid

wholesale term funding that matured in the quarter. Central banks around the world continued to make available a number of programs that were

established in Q2 2020 that were targeted to support the financial and funding markets and the provision of funding to customers affected by the

pandemic. BMO used these programs at the time in a manner consistent with other banks, given market disruptions. BMO did not further use those

programs in the third quarter and repaid funding from these programs as borrowings matured. These programs are expected to continue to be

available as necessary and in some cases for an extended period of time. BMO’s liquidity metrics, including the Liquidity Coverage Ratio (LCR),

remained well above internal targets and regulatory requirements.

BMO’s liquid assets are primarily held in our trading businesses, as well as in liquidity portfolios that are maintained for contingent liquidity risk

management purposes and as investments of excess structural liquidity. Liquid assets include unencumbered, high-quality assets that are marketable,

can be pledged as security for borrowings, and can be converted to cash in a time frame that meets our liquidity and funding requirements. BMO’s

liquid assets are summarized in the table below.

In the ordinary course of business, BMO may encumber a portion of cash and securities holdings as collateral in support of trading activities and our

participation in clearing and payment systems in Canada and abroad. In addition, BMO may receive liquid assets as collateral and may re-pledge these

assets in exchange for cash or as collateral in support of trading activities. Net unencumbered liquid assets, defined as on-balance sheet assets, such as

BMO-owned cash and securities and securities borrowed or purchased under resale agreements, plus other off-balance sheet eligible collateral

received, less collateral encumbered, totalled $314.2 billion as at July 31, 2020, compared with $289.2 billion as at April 30, 2020. The increase in

unencumbered liquid assets was primarily due to higher cash and securities balances resulting from net customer deposit growth and Global Markets

client activity. Net unencumbered liquid assets are primarily held at the parent bank level, at our U.S. bank entity BMO Harris Bank, and in our

broker/dealer operations. In addition to liquid assets, BMO has access to the Bank of Canada’s lending assistance programs, the Federal Reserve Bank

discount window in the United States and European Central Bank standby liquidity facilities.

In addition to cash and securities holdings, BMO may also pledge other assets, including mortgages and loans, to raise long-term secured funding.

BMO’s total encumbered assets and unencumbered liquid assets are summarized in the Asset Encumbrance table on page 39.

Liquid Assets As at July 31, 2020 As at April 30, 2020

Other cash & Net Net

Bank-owned securities Total gross Encumbered unencumbered unencumbered

(Canadian $ in millions) assets received assets (1) assets assets (2) assets (2)

Cash and cash equivalents 76,590 - 76,590 95 76,495 71,524

Deposits with other banks 8,364 - 8,364 - 8,364 7,687

Securities and securities borrowed or purchased under resale agreements

Sovereigns/Central banks/Multilateral development banks 118,642 102,630 221,272 115,454 105,818 107,173

NHA mortgage-backed securities and U.S. agency mortgage-backed

securities and collateralized mortgage obligations 42,412 9,547 51,959 20,793 31,166 30,587

Corporate & other debt 23,546 18,097 41,643 7,315 34,328 29,840

Corporate equity 43,305 45,866 89,171 52,291 36,880 21,244

Total securities and securities borrowed or purchased under resale agreements 227,905 176,140 404,045 195,853 208,192 188,844

NHA mortgage-backed securities (reported as loans at amortized cost) (3) 24,672 - 24,672 3,534 21,138 21,131

Total liquid assets 337,531 176,140 513,671 199,482 314,189 289,186

Other eligible assets at central banks (not included above) (4) 102,783 - 102,783 5,152 97,631 104,140

Total liquid assets and other sources 440,314 176,140 616,454 204,634 411,820 393,326

(1) Gross assets include bank-owned assets and cash and securities received from third parties.

(2) Net unencumbered liquid assets are defined as total gross assets less encumbered assets.

(3) Under IFRS, National Housing Authority (NHA) mortgage-backed securities that include mortgages owned by BMO as the underlying collateral are classified as loans. Unencumbered NHA mortgage-backed

securities have liquidity value and are included as liquid assets under BMO’s Liquidity and Funding Management Framework. This amount is shown as a separate line item, NHA mortgage-backed securities.

(4) Represents loans currently lodged at central banks that could potentially be used to access central bank funding. Loans available for pledging as collateral do not include other sources of additional liquidity

that may be realized from the bank’s loan portfolio, including incremental securitization, covered bond issuances and Federal Home Loan Bank (FHLB) advances.


Asset Encumbrance Encumbered (2) Net unencumbered (Canadian $ in millions) Pledged as Other Other Available as As at July 31, 2020 Total gross assets (1) collateral encumbered unencumbered (3) collateral (4)

Cash and deposits with other banks 84,954 - 95 - 84,859 Securities (5) 428,717 164,691 34,696 13,186 216,144 Loans and acceptances 420,656 65,613 5,152 252,260 97,631 Other assets

Derivative instruments 38,796 - - 38,796 - Customers' liability under acceptances 18,032 - - 18,032 - Premises and equipment 3,881 - - 3,881 - Goodwill 6,566 - - 6,566 - Intangible assets 2,470 - - 2,470 - Current tax assets 1,717 - - 1,717 - Deferred tax assets 1,456 - - 1,456 - Other assets 23,690 7,619 - 16,071 -

Total other assets 96,608 7,619 - 88,989 - Total assets 1,030,935 237,923 39,943 354,435 398,634

Encumbered (2) Net unencumbered

(Canadian $ in millions) Pledged as Other Other Available as

As at April 30, 2020 Total gross assets (1) collateral encumbered unencumbered (3) collateral (4)

Cash and deposits with other banks 79,280 - 69 - 79,211

Securities (5) 425,348 181,637 33,736 12,363 197,612

Loans and acceptances 443,757 75,053 5,319 259,245 104,140

Other assets

Derivative instruments 41,150 - - 41,150 -

Customers' liability under acceptances 22,473 - - 22,473 -

Premises and equipment 3,973 - - 3,973 -

Goodwill 6,785 - - 6,785 -

Intangible assets 2,526 - - 2,526 -

Current tax assets 1,898 - - 1,898 -

Deferred tax assets 1,391 - - 1,391 -

Other assets 25,682 10,943 - 14,739 -

Total other assets 105,878 10,943 - 94,935 -

Total assets 1,054,263 267,633 39,124 366,543 380,963

(1) Gross assets include bank-owned assets and cash and securities received from third parties.

(2) Pledged as collateral refers to the portion of on-balance sheet assets and other cash and securities that is pledged through repurchase agreements, securities lending, derivative contracts, minimum required

deposits at central banks and requirements associated with participation in clearing houses and payment systems. Other encumbered assets include assets that are restricted for legal or other reasons, such as

restricted cash and short sales.

(3) Other unencumbered assets include select liquid asset holdings that management believes are not readily available to support BMO’s liquidity requirements. These include cash and securities of $13.2 billion as

at July 31, 2020, which include securities held at BMO’s insurance subsidiary, significant equity investments, and certain investments held in our merchant banking business. Other unencumbered assets also

include mortgages and loans that may be securitized to access secured funding.

(4) Loans included as available as collateral represent loans currently lodged at central banks that could potentially be used to access central bank funding. Loans available for pledging as collateral do not include

other sources of additional liquidity that may be realized from the bank’s loan portfolio, such as incremental securitization, covered bond issuances and FHLB advances.

(5) Includes securities, securities borrowed or purchased under resale agreements and NHA mortgage-backed securities (reported as loans at amortized cost).


Liquidity Coverage Ratio The average daily liquidity coverage ratio (LCR) for the quarter ended July 31, 2020 was 147% unchanged from the prior quarter. The LCR is calculated

on a daily basis as the ratio of the stock of High-Quality Liquid Assets (HQLA) to total net stressed cash outflows over the next 30 calendar days. The

impact of higher HQLA was offset by an increase in net cash outflows. While banks are required to maintain an LCR greater than 100% in normal

conditions, banks are also expected to be able to utilize HQLA in a period of stress, which may result in an LCR of less than 100% during such a period.

BMO’s HQLA are primarily comprised of cash, highly-rated debt issued or backed by governments, highly-rated covered bonds and non-financial

corporate debt, and non-financial equities that are part of a major stock index. Net cash flows include outflows from deposits, secured and unsecured

wholesale funding, commitments and potential collateral requirements, offset by permitted inflows from loans, securities lending activities and other

non-HQLA debt maturing over a 30-day horizon. OSFI-prescribed weights are applied to cash flows and HQLA to arrive at the weighted values and the

LCR. The LCR does not reflect excess liquidity in BMO Financial Corp. above 100%, because of limitations on the transfer of liquidity between BMO

Financial Corp. and the parent bank. The LCR is only one measure of a bank’s liquidity position and does not fully capture all of the bank’s liquid assets

or the funding alternatives that may be available during a period of stress. BMO’s total liquid assets are shown in the Liquid Assets table on page 38.

Additional information on Liquidity and Funding Risk governance can be found on page 91 of BMO’s 2019 Annual Report. Please also see the

Impact of COVID-19 and Risk Management sections.

BMO’s LCR is summarized in the following table. For the quarter ended July 31, 2020

(Canadian $ in billions, except as noted)

Total unweighted value (average) (1)(2)

Total weighted value (average) (2)(3)

High-Quality Liquid Assets Total high-quality liquid assets (HQLA) * 206.5 Cash Outflows Retail deposits and deposits from small business customers, of which: 220.0 15.5

Stable deposits 106.1 3.2 Less stable deposits 113.9 12.3

Unsecured wholesale funding, of which: 216.8 106.7 Operational deposits (all counterparties) and deposits in networks of cooperative banks 102.4 25.6 Non-operational deposits (all counterparties) 88.4 55.1 Unsecured debt 26.0 26.0

Secured wholesale funding * 24.2 Additional requirements, of which: 169.2 34.1

Outflows related to derivatives exposures and other collateral requirements 18.6 4.5 Outflows related to loss of funding on debt products 3.1 3.1 Credit and liquidity facilities 147.5 26.5

Other contractual funding obligations 0.8 - Other contingent funding obligations 430.6 8.2 Total cash outflows * 188.7 Cash Inflows Secured lending (e.g. reverse repos) 154.5 34.7 Inflows from fully performing exposures 9.9 5.4 Other cash inflows 6.9 6.9 Total cash inflows 171.3 47.0

Total adjusted value (4)

Total HQLA 206.5 Total net cash outflows 141.7 Liquidity Coverage Ratio (%) (2) 147

For the quarter ended April 30, 2020 Total adjusted value (4)

Total HQLA 187.5

Total net cash outflows 127.9

Liquidity Coverage Ratio (%) 147

* Disclosure is not required under the LCR disclosure standard.

(1) Unweighted values are calculated at market value (for HQLA) or as outstanding balances maturing or callable within 30 days (for inflows and outflows).

(2) Values are calculated based on the simple average of the daily LCR over 64 business days in the third quarter of 2020.

(3) Weighted values are calculated after the application of the weights prescribed under the OSFI Liquidity Adequacy Requirements (LAR) Guideline for HQLA and cash inflows and outflows.

(4) Adjusted values are calculated based on total weighted values after applicable caps as defined by the LAR Guideline.


Funding Strategy Our funding philosophy requires that secured and unsecured wholesale funding used to support loans and less liquid assets must have a term (typically

maturing in two to ten years) that will support the effective term to maturity of these assets. Secured and unsecured wholesale funding for liquid

trading assets is largely shorter term (maturing in one year or less), is aligned with the liquidity of the assets being funded, and is subject to limits on

aggregate maturities that are permitted across different periods. Supplemental liquidity pools are funded largely with wholesale term funding.

BMO maintains a large and stable base of customer deposits that, in combination with our strong capital base, is a source of strength. It supports

the maintenance of a sound liquidity position and reduces our reliance on wholesale funding. Customer deposits totalled $461.5 billion at July 31, 2020,

increasing from $449.1 billion as at April 30, 2020. Both commercial and retail deposits grew significantly, as customers preserved liquidity to meet

potential funding needs in the current environment. BMO also receives non-marketable deposits from corporate and institutional customers in support

of certain trading activities. These deposits totalled $31.9 billion as at July 31, 2020, an increase from $24.0 billion as at April 30, 2020.

Total wholesale funding outstanding, which largely consists of negotiable marketable securities, was $189.8 billion as at July 31, 2020, with

$58.2 billion sourced as secured funding and $131.6 billion as unsecured funding. Wholesale funding outstanding decreased from $206.1 billion as at

April 30, 2020, primarily due to net wholesale funding maturities. The mix and maturities of BMO’s wholesale term funding are outlined in the table

below. Additional information on deposit maturities can be found on page 43. BMO maintains a sizeable portfolio of unencumbered liquid assets,

totaling $314.2 billion as at July 31, 2020, that can be monetized to meet potential funding requirements, as described on page 38.

In April 2018, the Government of Canada published the final regulations on Canada’s Bank Recapitalization (Bail-In) Regime, which became

effective on September 23, 2018. Bail-in debt includes senior unsecured debt issued directly by the bank on or after September 23, 2018, that has an

original term greater than 400 days and is marketable, subject to certain exceptions. BMO is required to meet minimum Total Loss Absorbing Capacity

(TLAC) ratio requirements by November 1, 2021. The bank continues to be well-positioned to meet TLAC requirements when they come into force. For

more information on Canada’s Bail-In Regime and TLAC requirements, please see Regulatory Developments under Capital Management on page 15.

Diversification of our wholesale funding sources is an important part of our overall liquidity management strategy. BMO’s wholesale funding

activities are well-diversified by jurisdiction, currency, investor segment, instrument and maturity profile. BMO maintains ready access to long-term

wholesale funding through various borrowing programs, including a European Note Issuance Program, Canadian, Australian and U.S. Medium-Term

Note programs, Canadian and U.S. mortgage securitizations, Canadian credit card loans, auto loans and home equity line of credit (HELOC)

securitizations, U.S. transportation finance (TF) loans, covered bonds, and Canadian and U.S. senior unsecured deposits.

BMO’s wholesale funding plan seeks to ensure sufficient funding capacity is available to execute our business strategies. The funding plan

considers expected maturities, as well as asset and liability growth projected for our businesses in our forecasting and planning processes, and

assesses funding needs in relation to the sources available. The funding plan is reviewed annually by the Balance Sheet and Capital Management

Committee and Risk Management Committee and approved by the Risk Review Committee, and is regularly updated to reflect actual results and

incorporate updated forecast information.

Wholesale Funding Maturities (1) As at July 31, 2020 As at April 30, 2020

Less than 1 to 3 3 to 6 6 to 12 Subtotal less 1 to 2 Over

(Canadian $ in millions) 1 month months months months than 1 year years 2 years Total Total

Deposits from banks 5,742 402 5 295 6,444 - 9 6,453 3,381

Certificates of deposit and commercial paper 13,387 21,034 10,111 7,378 51,910 - - 51,910 56,262

Bearer deposit notes 765 288 22 - 1,075 - - 1,075 666

Asset-backed commercial paper (ABCP) 796 1,133 1,604 - 3,533 - - 3,533 3,750

Senior unsecured medium-term notes - 2,091 695 6,438 9,224 19,109 31,337 59,670 69,038

Senior unsecured structured notes (2) 11 5 - - 16 22 3,699 3,737 3,938

Covered bonds and securitizations

Mortgage and HELOC securitizations - 863 717 2,297 3,877 2,554 14,318 20,749 19,906

Covered bonds 2,367 - - 4,375 6,742 4,685 15,887 27,314 28,363

Other asset-backed securitizations (3) - - 96 15 111 2,712 3,818 6,641 7,867

Subordinated debt - - - - - - 8,709 8,709 7,526

Other (4) - - - - - - - - 5,423

Total 23,068 25,816 13,250 20,798 82,932 29,082 77,777 189,791 206,120

Of which:

Secured 3,163 1,996 2,417 6,687 14,263 9,951 34,023 58,237 65,309

Unsecured 19,905 23,820 10,833 14,111 68,669 19,131 43,754 131,554 140,811

Total (5) 23,068 25,816 13,250 20,798 82,932 29,082 77,777 189,791 206,120

(1) Wholesale unsecured funding primarily includes funding raised through the issuance of marketable, negotiable instruments. Wholesale funding excludes deposits and covered bonds issued to access central

bank programs, repo transactions and bankers’ acceptances, which are disclosed in the contractual maturity table on page 43, and also excludes ABCP issued by certain ABCP conduits that are not consolidated

for financial reporting purposes.

(2) Primarily issued to institutional investors.

(3) Includes credit card, auto and transportation finance loan securitizations.

(4) Refers to FHLB advances.

(5) Total wholesale funding consists of Canadian-dollar-denominated funding totalling $54.8 billion and U.S.-dollar-denominated and other foreign-currency-denominated funding totalling $135.0 billion as at

July 31, 2020.


Regulatory Developments The Net Stable Funding Ratio (NSFR) is a regulatory liquidity metric that assesses the stability of a bank’s funding profile in relation to the liquidity

value of a bank’s assets. OSFI finalized the domestic implementation of the NSFR in the second quarter of 2019. Canadian domestic systemically

important banks (D-SIBs), including BMO, are required to maintain a minimum NSFR of 100%, effective January 1, 2020, and to publicly disclose their

NSFR, effective for the quarter ending January 31, 2021. BMO’s NSFR exceeds the regulatory minimum as at July 31, 2020.

Credit Ratings The credit ratings assigned to BMO’s short-term and senior long-term debt securities by external rating agencies are important in the raising of both

capital and funding to support our business operations. Maintaining strong credit ratings allows us to access capital markets at competitive pricing

levels. Should our credit ratings experience a downgrade, our cost of funding would likely increase and our access to funding and capital through

capital markets could be reduced. A material downgrade of our ratings could also have other consequences, including those set out in Note 8 starting

on page 162 of BMO’s 2019 Annual Report.

The credit ratings assigned to BMO’s senior debt by rating agencies are indicative of high-grade, high-quality issues. Moody’s, Standard & Poor’s

(S&P) and DBRS have a stable outlook on BMO, while Fitch has a negative outlook.

As at July 31, 2020

Rating agency Short-term debt Senior debt (1)

Long-term deposits/ Legacy senior debt (2)

Subordinated debt (NVCC) Outlook

Moody’s P-1 A2 Aa2 Baa1 Stable S&P A-1 A- A+ BBB+ Stable Fitch F1+ AA- AA A Negative DBRS R-1 (high) AA (low) AA A (low) Stable

(1) Subject to conversion under the Bank Recapitalization (Bail-In) Regime.

(2) Long-term deposits/Legacy senior debt includes senior debt issued prior to September 23, 2018, and senior debt issued on or after September 23, 2018, that is excluded from the Bank Recapitalization

(Bail-In) Regime.

We are required to deliver collateral to certain counterparties in the event of a downgrade to our current credit rating. The incremental collateral

required is based on mark-to-market exposure, collateral valuations, and collateral threshold arrangements, as applicable. As at July 31, 2020, we

would be required to provide additional collateral to counterparties totalling $216 million, $532 million and $877 million under a one-notch,

two-notch and three-notch downgrade, respectively.


Contractual Maturities of Assets and Liabilities and Off-Balance Sheet Commitments The tables below show the remaining contractual maturity of on-balance sheet assets and liabilities and off-balance sheet commitments. The

contractual maturity of financial assets and liabilities is an input to, but is not necessarily consistent with, the expected maturity of assets and liabilities

that is used in the management of liquidity and funding risk. We forecast asset and liability cash flows, both under normal market conditions and

under a number of stress scenarios, to manage liquidity and funding risk. Stress scenarios include assumptions for loan repayments, deposit

withdrawals, and credit commitment and liquidity facility drawdowns by counterparty and product type. Stress scenarios also consider the time horizon

over which liquid assets can be monetized and the related haircuts and potential collateral requirements that may result from both market volatility

and credit rating downgrades, among other assumptions.

(Canadian $ in millions) July 31, 2020

0 to 1 1 to 3 3 to 6 6 to 9 9 to 12 1 to 2 2 to 5 Over 5 No month months months months months years years years maturity Total

On-Balance Sheet Financial Instruments Assets

Cash and Cash Equivalents 75,560 - - - - - - - 1,030 76,590

Interest Bearing Deposits with Banks 3,594 1,637 1,388 602 1,143 - - - - 8,364

Securities 4,582 5,668 7,569 8,692 6,355 19,973 50,266 81,496 43,304 227,905

Securities Borrowed or Purchased under Resale Agreements 85,294 24,189 5,059 3,091 772 308 - - - 118,713

Loans Residential mortgages 2,609 3,624 4,660 4,654 6,152 19,583 76,410 7,789 - 125,481 Consumer instalment and other personal 751 983 1,197 1,279 1,361 5,020 23,977 12,100 22,500 69,168 Credit cards - - - - - - - - 7,947 7,947 Business and government 19,252 5,501 5,888 6,718 7,372 23,938 82,288 45,155 49,871 245,983 Allowance for credit losses - - - - - - - - (3,251) (3,251)

Total Loans, net of allowance 22,612 10,108 11,745 12,651 14,885 48,541 182,675 65,044 77,067 445,328

Other Assets Derivative instruments 2,498 2,602 3,306 1,913 1,085 4,198 10,748 12,446 - 38,796 Customers’ liability under acceptances 13,533 4,343 141 15 - - - - - 18,032 Other 1,668 371 334 26 21 18 4 4,566 32,772 39,780

Total Other Assets 17,699 7,316 3,781 1,954 1,106 4,216 10,752 17,012 32,772 96,608

Total Assets 209,341 48,918 29,542 26,990 24,261 73,038 243,693 163,552 154,173 973,508



Liabilities and Equity Deposits (1) Banks 14,863 6,628 1,804 11,910 326 7 27 76 6,258 41,899 Business and government 32,377 32,224 16,814 19,865 8,528 25,846 48,273 11,509 202,269 397,705 Individuals 5,039 13,756 15,278 13,152 10,183 7,747 13,319 2,059 140,463 220,996

Total Deposits 52,279 52,608 33,896 44,927 19,037 33,600 61,619 13,644 348,990 660,600

Other Liabilities Derivative instruments 3,391 3,124 4,217 1,845 1,438 4,796 10,504 10,544 - 39,859 Acceptances 13,533 4,343 141 15 - - - - - 18,032 Securities sold but not yet purchased 30,579 - - - - - - - - 30,579 Securities lent or sold under

repurchase agreements 82,704 8,345 1,193 6,764 391 457 - - - 99,854 Securitization and structured entities' liabilities 18 1,005 1,526 312 2,980 5,418 13,309 2,893 - 27,461 Other 9,021 308 513 109 150 722 1,301 3,502 18,397 34,023

Total Other Liabilities 139,246 17,125 7,590 9,045 4,959 11,393 25,114 16,939 18,397 249,808

Subordinated Debt - - - - - - - 8,513 - 8,513

Total Equity - - - - - - - - 54,587 54,587

Total Liabilities and Equity 191,525 69,733 41,486 53,972 23,996 44,993 86,733 39,096 421,974 973,508

(1) Deposits payable on demand and payable after notice have been included under no maturity.



Off-Balance Sheet Commitments Commitments to extend credit (1) 1,026 5,510 6,430 9,733 16,787 22,674 101,544 6,796 - 170,500 Backstop liquidity facilities - - - - - 5,277 - - - 5,277 Leases - 5 8 11 12 50 192 916 - 1,194 Securities lending 4,552 - - - - - - - - 4,552 Purchase obligations 46 92 34 29 28 131 186 84 - 630

(1) A large majority of these commitments expire without being drawn upon. As a result, the total contractual amounts may not be representative of the funding likely to be required for these commitments.


(Canadian $ in millions) October 31, 2019

0 to 1 1 to 3 3 to 6 6 to 9 9 to 12 1 to 2 2 to 5 Over 5 No

month months months months months years years years maturity Total

On-Balance Sheet Financial Instruments Assets

Cash and Cash Equivalents 47,844 - - - - - - - 959 48,803

Interest Bearing Deposits with Banks 4,088 1,893 1,081 714 211 - - - - 7,987

Securities 2,680 3,420 2,797 3,508 4,670 15,001 46,687 66,005 44,670 189,438

Securities Borrowed or Purchased

under Resale Agreements 74,972 22,091 5,254 859 518 - 310 - - 104,004

Loans

Residential mortgages 1,691 2,059 5,285 6,818 7,138 22,309 68,143 10,297 - 123,740

Consumer instalment and other personal 645 519 991 1,272 1,502 4,823 22,391 11,947 23,646 67,736

Credit cards - - - - - - - - 8,859 8,859

Business and government 12,490 7,072 6,168 7,760 6,547 24,687 87,486 20,331 55,068 227,609

Allowance for credit losses - - - - - - - - (1,850) (1,850)

Total Loans, net of allowance 14,826 9,650 12,444 15,850 15,187 51,819 178,020 42,575 85,723 426,094

Other Assets Derivative instruments 1,209 1,867 877 830 911 2,375 5,095 8,980 - 22,144

Customers’ liability under acceptances 20,694 2,562 173 159 5 - - - - 23,593

Other 1,951 593 245 12 5 7 5 4,475 22,839 30,132

Total Other Assets 23,854 5,022 1,295 1,001 921 2,382 5,100 13,455 22,839 75,869

Total Assets 168,264 42,076 22,871 21,932 21,507 69,202 230,117 122,035 154,191 852,195




Liabilities and Equity Deposits (1)

Banks 12,177 4,187 1,215 319 1,174 - - 201 4,543 23,816

Business and government 21,088 28,511 21,209 22,334 18,023 22,983 49,292 11,759 147,958 343,157

Individuals 3,607 8,932 12,080 13,390 15,706 11,418 13,257 2,031 120,749 201,170

Total Deposits 36,872 41,630 34,504 36,043 34,903 34,401 62,549 13,991 273,250 568,143

Other Liabilities

Derivative instruments 1,329 2,574 1,240 970 1,032 2,985 6,798 6,670 - 23,598

Acceptances 20,694 2,562 173 159 5 - - - - 23,593

Securities sold but not yet purchased 26,253 - - - - - - - - 26,253

Securities lent or sold

under repurchase agreements 74,501 7,697 760 1,107 - 2,285 306 - - 86,656

Securitization and structured entities' liabilities 1 1,655 1,340 1,033 1,038 5,350 13,779 2,963 - 27,159

Other 12,325 3,188 33 29 74 537 3,596 2,406 16,534 38,722

Total Other Liabilities 135,103 17,676 3,546 3,298 2,149 11,157 24,479 12,039 16,534 225,981

Subordinated Debt - - - - - - - 6,995 - 6,995

Total Equity - - - - - - - - 51,076 51,076

Total Liabilities and Equity 171,975 59,306 38,050 39,341 37,052 45,558 87,028 33,025 340,860 852,195

(1) Deposits payable on demand and payable after notice have been included under no maturity.





Off-Balance Sheet Commitments

Commitments to extend credit (1) 1,868 3,777 5,698 8,832 12,511 21,574 102,113 5,643 - 162,016

Backstop liquidity facilities - - - - - - 5,550 - - 5,550

Leases 32 66 98 97 96 361 931 2,119 - 3,800

Securities lending 4,102 - - - - - - - - 4,102

Purchase obligations 53 98 138 133 137 111 187 69 - 926

(1) A large majority of these commitments expire without being drawn upon. As a result, the total contractual amounts may not be representative of the funding likely to be required for these commitments.


European Exposures BMO’s European exposures were disclosed and discussed on pages 83 and 84 of BMO’s 2019 Annual Report. Our exposure to European countries, as at

July 31, 2020, is set out in the tables that follow. Our net portfolio exposures are summarized in the below tables for funded lending, securities

(inclusive of credit default swaps (CDS) activity), repo-style transactions and derivatives.

European Exposure by Country and Counterparty (1) (Canadian $ in millions)

As at July 31, 2020 Funded lending (2) Securities (3)(4) Repo-style transactions and derivatives (5)(6) Total Net Exposure Country Total Bank Corporate Sovereign Total Bank Corporate Sovereign Total

GIIPS Greece - - - - - - - - - -

Ireland (7) 466 - - - - 2 597 - 599 1,065

Italy 14 - - - - 1 - - 1 15

Portugal - - - - - - - - - -

Spain 170 53 2 - 55 1 - 2 3 228

Total – GIIPS 650 53 2 - 55 4 597 2 603 1,308 Eurozone (excluding GIIPS) France 246 41 - 77 118 24 30 8 62 426

Germany 389 596 54 366 1,016 111 5 4 120 1,525

Luxembourg 333 - - - - 8 79 - 87 420

Netherlands 338 494 - - 494 23 225 - 248 1,080

Other (8) 12 - 2 227 229 2 - 1 3 244

Total – Eurozone (excluding GIIPS) 1,318 1,131 56 670 1,857 168 339 13 520 3,695 Rest of Europe Denmark 14 172 - 138 310 3 - - 3 327

Norway 703 60 1 - 61 - 10 4 14 778

Sweden 16 328 - 297 625 5 - - 5 646

Switzerland 174 - - - - 36 147 - 183 - 357

United Kingdom 1,871 1 674 8,690 9,365 489 352 117 958 12,194

Other (8) 54 - - - - - 1 - 1 55

Total – Rest of Europe 2,832 561 675 9,125 10,361 533 510 121 1,164 14,357 Total – All of Europe (9) 4,800 1,745 733 9,795 12,273 705 1,446 136 2,287 19,360 As at April 30, 2020 Funded lending (2) Securities (3) Repo-style transactions and derivatives (5)(6) Total Net

Exposure Country Total Bank Corporate Sovereign Total Bank Corporate Sovereign Total

Total – GIIPS 560 61 - - 61 4 195 11 210 831

Total – Eurozone (excluding GIIPS) 1,493 1,096 50 825 1,971 378 198 38 614 4,078

Total – Rest of Europe 3,267 705 646 9,014 10,365 470 275 807 1,552 15,184

Total – All of Europe (9) 5,320 1,862 696 9,839 12,397 852 668 856 2,376 20,093

Refer to footnotes in the following table.

European Lending Exposure by Country and Counterparty (1)

Lending (2)

(Canadian $ in millions) Funded lending as at July 31, 2020 As at July 31, 2020 April 30, 2020

Country Bank Corporate Sovereign Commitments Funded Commitments Funded

GIIPS Greece - - - - - - -

Ireland (7) 2 464 - 599 466 364 351

Italy 14 - - 14 14 15 15

Portugal - - - - - - -

Spain 151 19 - 244 170 249 194

Total – GIIPS 167 483 - 857 650 628 560

Eurozone (excluding GIIPS) France 187 59 - 393 246 376 235

Germany 235 154 - 608 389 634 428

Luxembourg 94 127 112 572 333 610 416

Netherlands 55 283 - 395 338 447 402

Other (8) 12 - - 12 12 12 12

Total – Eurozone (excluding GIIPS) 583 623 112 1,980 1,318 2,079 1,493

Rest of Europe Denmark - 14 - 14 14 14 14

Norway 30 673 - 1,161 703 1,218 656

Sweden 8 8 - 112 16 90 42

Switzerland 12 163 - 250 175 242 167

United Kingdom 8 1,862 - 3,531 1,870 3,525 2,332

Other (8) - 54 - 87 54 91 56

Total – Rest of Europe 58 2,774 - 5,155 2,832 5,180 3,267

Total – All of Europe (9) 808 3,880 112 7,992 4,800 7,887 5,320

(1) BMO has the following indirect exposures to Europe as at July 31, 2020: Collateral of €1.0 billion to support trading activity in securities (€144 million from GIIPS) and €21 million of cash collateral paid;

and, guarantees of $13.9 billion ($228 million to GIIPS).

(2) Funded lending includes loans.

(3) Securities include cash products, insurance investments and traded credit.

(4) BMO’s total net notional CDS exposure (embedded as part of the securities exposure in this table) to Europe was $178 million, with no net single-name* CDS exposure to GIIPS countries as at July 31, 2020

(*includes a net position of $139 million (bought protection) on a CDS Index, of which 13% is comprised of GIIPS domiciled entities).

(5) Repo-style transactions are primarily with bank counterparties for which BMO holds collateral ($37 billion for Europe as at July 31, 2020).

(6) Derivatives amounts are marked-to-market, incorporating transaction netting where master netting agreements with counterparties have been entered into, and collateral offsets for counterparties where

a Credit Support Annex is in effect.

(7) Does not include Irish subsidiary reserves we are required to maintain with the Irish Central Bank of $83 million as at July 31, 2020.

(8) Other Eurozone exposure includes 4 countries with less than $300 million net exposure. Other European exposure is distributed across 2 countries.

(9) Of our total net direct exposure to Europe, approximately 93% was to counterparties in countries with a rating of Aa2/AA from at least one of Moody’s or S&P.

Caution This Risk Management section contains forward-looking statements. Please refer to the Caution Regarding Forward-Looking Statements.


Interim Consolidated Financial Statements

Consolidated Statement of Income (Unaudited) (Canadian $ in millions, except as noted) For the three months ended For the nine months ended

July 31, April 30, July 31, July 31, July 31, 2020 2020 2019 2020 2019

Interest, Dividend and Fee Income Loans $ 4,204 $ 4,689 $ 5,120 $ 13,856 $ 14,752 Securities (Note 2) 1,249 1,363 1,407 3,971 4,126 Deposits with banks 49 101 187 343 592

5,502 6,153 6,714 18,170 19,470

Interest Expense Deposits 1,292 1,738 2,224 5,157 6,413 Subordinated debt 65 66 69 201 208 Other liabilities (Note 1) 610 831 1,204 2,371 3,325

1,967 2,635 3,497 7,729 9,946

Net Interest Income 3,535 3,518 3,217 10,441 9,524

Non-Interest Revenue Securities commissions and fees 260 277 259 789 761 Deposit and payment service charges 299 313 309 916 890 Trading revenues (losses) 68 (217) 115 (8) 319 Lending fees 309 322 314 956 879 Card fees 85 80 109 264 330 Investment management and custodial fees 455 430 444 1,341 1,298 Mutual fund revenues 348 348 357 1,062 1,060 Underwriting and advisory fees 287 239 260 811 754 Securities gains (losses), other than trading 31 (11) 90 84 181 Foreign exchange gains, other than trading 21 21 48 89 137 Insurance revenues (losses) 1,321 (166) 989 2,035 2,748 Investments in associates and joint ventures 52 34 31 112 112 Other 118 76 124 308 403

3,654 1,746 3,449 8,759 9,872

Total Revenue 7,189 5,264 6,666 19,200 19,396

Provision for Credit Losses (Note 3) 1,054 1,118 306 2,521 619

Insurance Claims, Commissions and Changes in Policy Benefit Liabilities 1,189 (197) 887 1,708 2,374 Non-Interest Expense Employee compensation 1,964 1,902 1,960 5,994 6,042 Premises and equipment (Note 1) 785 806 734 2,348 2,229 Amortization of intangible assets 154 156 135 461 406 Travel and business development 57 118 142 296 411 Communications 71 83 72 233 224 Professional fees 135 128 141 396 403 Other 278 323 307 901 928

3,444 3,516 3,491 10,629 10,643

Income Before Provision for Income Taxes 1,502 827 1,982 4,342 5,760 Provision for income taxes (Note 11) 270 138 425 829 1,196

Net Income attributable to Equity Holders of the Bank $ 1,232 $ 689 $ 1,557 $ 3,513 $ 4,564

Earnings Per Share (Canadian $) (Note 10) Basic $ 1.81 $ 1.00 $ 2.34 $ 5.18 $ 6.90 Diluted 1.81 1.00 2.34 5.18 6.88 Dividends per common share 1.06 1.06 1.03 3.18 3.03

The accompanying notes are an integral part of these interim consolidated financial statements.




Consolidated Statement of Comprehensive Income (Unaudited) (Canadian $ in millions) For the three months ended For the nine months ended

July 31, April 30, July 31, July 31, July 31, 2020 2020 2019 2020 2019

Net Income $ 1,232 $ 689 $ 1,557 $ 3,513 $ 4,564

Other Comprehensive Income (Loss), net of taxes Items that may subsequently be reclassified to net income

Net change in unrealized gains on fair value through OCI debt securities Unrealized gains on fair value through OCI debt securities arising

during the period (1) 141 170 112 421 345 Reclassification to earnings of (gains) in the period (2) (18) (36) (14) (74) (43)

123 134 98 347 302

Net change in unrealized gains on cash flow hedges Gains on derivatives designated as cash flow hedges arising during the period (3) 83 1,380 290 1,673 1,480 Reclassification to earnings of (gains) losses on derivatives designated as

cash flow hedges in the period (4) (37) 21 36 8 122

46 1,401 326 1,681 1,602

Net gains (losses) on translation of net foreign operations Unrealized gains (losses) on translation of net foreign operations (1,180) 1,487 (577) 516 (46) Unrealized gains (losses) on hedges of net foreign operations (5) 206 (304) 94 (145) 4

(974) 1,183 (483) 371 (42)

Items that will not be reclassified to net income Gains (losses) on remeasurement of pension and other employee

future benefit plans (6) (189) 73 (233) (244) (383) Gains (losses) on remeasurement of own credit risk on financial

liabilities designated at fair value (7) (330) 351 31 (49) 12

(519) 424 (202) (293) (371)

Other Comprehensive Income (Loss), net of taxes (1,324) 3,142 (261) 2,106 1,491

Total Comprehensive Income (Loss) attributable to Equity Holders of the Bank $ (92) $ 3,831 $ 1,296 $ 5,619 $ 6,055

(1) Net of income tax (provision) of $(47) million, $(62) million, $(39) million for the three months ended, and $(147) million, $(117) million for the nine months ended, respectively.

(2) Net of income tax provision of $6 million, $10 million, $5 million for the three months ended, and $23 million, $15 million for the nine months ended, respectively.

(3) Net of income tax (provision) of $(27) million, $(497) million, $(106) million for the three months ended, and $(600) million, $(536) million for the nine months ended, respectively.

(4) Net of income tax provision (recovery) of $13 million, $(7) million, $(13) million for the three months ended, and $(3) million, $(44) million for the nine months ended, respectively.

(5) Net of income tax (provision) recovery of $(74) million, $110 million, $(35) million for the three months ended, and $53 million, $(2) million for the nine months ended, respectively.

(6) Net of income tax (provision) recovery of $65 million, $(26) million, $83 million for the three months ended, and $85 million, $138 million for the nine months ended, respectively.

(7) Net of income tax (provision) recovery of $120 million, $(127) million, $(11) million for the three months ended, and $18 million, $(4) million for the nine months ended, respectively.




Consolidated Balance Sheet (Unaudited) (Canadian $ in millions) As at

July 31, April 30, October 31, 2020 2020 2019

Assets Cash and Cash Equivalents $ 76,590 $ 71,593 $ 48,803 Interest Bearing Deposits with Banks 8,364 7,687 7,987 Securities (Note 2) Trading 89,207 83,362 85,903 Fair value through profit or loss 14,053 13,572 13,704 Fair value through other comprehensive income 78,493 74,476 64,515 Debt securities at amortized cost 45,229 41,592 24,472 Investments in associates and joint ventures 923 906 844 227,905 213,908 189,438 Securities Borrowed or Purchased Under Resale Agreements 118,713 119,058 104,004 Loans Residential mortgages 125,481 125,534 123,740 Consumer instalment and other personal 69,168 69,818 67,736 Credit cards 7,947 7,672 8,859 Business and government 245,983 268,695 227,609

448,579 471,719 427,944

Allowance for credit losses (Note 3) (3,251) (2,776) (1,850)

445,328 468,943 426,094

Other Assets Derivative instruments 38,796 41,150 22,144 Customersʼ liability under acceptances 18,032 22,473 23,593 Premises and equipment (Note 1) 3,881 3,973 2,055 Goodwill 6,566 6,785 6,340 Intangible assets 2,470 2,526 2,424 Current tax assets 1,717 1,898 1,165 Deferred tax assets 1,456 1,391 1,568 Other 23,690 25,682 16,580

96,608 105,878 75,869

Total Assets $ 973,508 $ 987,067 $ 852,195

Liabilities and Equity Deposits (Note 5) $ 660,600 $ 653,710 $ 568,143 Other Liabilities Derivative instruments 39,859 45,909 23,598 Acceptances 18,032 22,473 23,593 Securities sold but not yet purchased 30,579 30,212 26,253 Securities lent or sold under repurchase agreements 99,854 105,943 86,656 Securitization and structured entities' liabilities 27,461 27,888 27,159 Current tax liabilities 56 88 55 Deferred tax liabilities 82 65 60 Other (Note 1) 33,885 38,201 38,607

249,808 270,779 225,981

Subordinated Debt (Note 5) 8,513 7,344 6,995

Equity Preferred shares and other equity instruments (Note 6) 5,348 5,348 5,348 Common shares (Note 6) 13,200 13,000 12,971 Contributed surplus 302 301 303 Retained earnings (Note 1) 29,902 29,426 28,725 Accumulated other comprehensive income 5,835 7,159 3,729

Total Equity 54,587 55,234 51,076

Total Liabilities and Equity $ 973,508 $ 987,067 $ 852,195




Consolidated Statement of Changes in Equity (Unaudited) (Canadian $ in millions) For the three months ended For the nine months ended

July 31, July 31, July 31, July 31, 2020 2019 2020 2019

Preferred Shares and Other Equity Instruments (Note 6) Balance at beginning of period $ 5,348 $ 4,690 $ 5,348 $ 4,340 Issued during the period - 658 - 1,008 Balance at End of Period 5,348 5,348 5,348 5,348 Common Shares (Note 6) Balance at beginning of period 13,000 12,939 12,971 12,929 Issued under the Shareholder Dividend Reinvestment and Share Purchase Plan 214 - 214 - Issued under the Stock Option Plan 1 19 30 49 Repurchased for cancellation or for treasury shares (15) - (15) (20) Balance at End of Period 13,200 12,958 13,200 12,958 Contributed Surplus Balance at beginning of period 301 307 303 300 Stock option expense, net of options exercised 1 (3) (1) 1 Other - (1) - 2 Balance at End of Period 302 303 302 303 Retained Earnings Balance at beginning of period 29,426 27,405 28,725 25,850 Impact from adopting IFRS 16 (Note 1) - na (59) na Net income attributable to equity holders of the bank 1,232 1,557 3,513 4,564 Dividends on preferred shares and distributions payable on other equity instruments (73) (59) (195) (159) Dividends on common shares (682) (658) (2,038) (1,936) Share issue expense - (4) - (8) Common shares repurchased for cancellation (Note 6) - - - (70) Net discount on sale of treasury shares (1) - (44) - Balance at End of Period 29,902 28,241 29,902 28,241 Accumulated Other Comprehensive Income (Loss) on Fair Value through OCI Securities, net of taxes Balance at beginning of period 250 (111) 26 (315) Unrealized gains on fair value through OCI debt securities arising during the period 141 112 421 345 Reclassification to earnings of (gains) on fair value through OCI debt securities during the period (18) (14) (74) (43) Balance at End of Period 373 (13) 373 (13) Accumulated Other Comprehensive Income on Cash Flow Hedges, net of taxes Balance at beginning of period 2,148 202 513 (1,074) Gains on derivatives designated as cash flow hedges arising during the period 83 290 1,673 1,480 Reclassification to earnings of (gains) losses on derivatives designated as cash flow hedges in the period (37) 36 8 122 Balance at End of Period 2,194 528 2,194 528 Accumulated Other Comprehensive Income on Translation

of Net Foreign Operations, net of taxes Balance at beginning of period 5,048 4,168 3,703 3,727 Unrealized gains (losses) on translation of net foreign operations (1,180) (577) 516 (46) Unrealized gains (losses) on hedges of net foreign operations 206 94 (145) 4 Balance at End of Period 4,074 3,685 4,074 3,685 Accumulated Other Comprehensive (Loss) on Pension and Other Employee

Future Benefit Plans, net of taxes Balance at beginning of period (438) 19 (383) 169 (Losses) on remeasurement of pension and other employee future benefit plans (189) (233) (244) (383) Balance at End of Period (627) (214) (627) (214) Accumulated Other Comprehensive (Loss) on Own Credit Risk on

Financial Liabilities Designated at Fair Value, net of taxes Balance at beginning of period 151 (224) (130) (205) Gains (losses) on remeasurement of own credit risk on financial liabilities designated at fair value (330) 31 (49) 12 Balance at End of Period (179) (193) (179) (193) Total Accumulated Other Comprehensive Income 5,835 3,793 5,835 3,793 Total Equity $ 54,587 $ 50,643 $ 54,587 $ 50,643

na – not applicable due to IFRS 16 adoption.




Consolidated Statement of Cash Flows (Unaudited) (Canadian $ in millions) For the three months ended For the nine months ended

July 31, July 31, July 31, July 31, 2020 2019 2020 2019

Cash Flows from Operating Activities Net Income $ 1,232 $ 1,557 $ 3,513 $ 4,564 Adjustments to determine net cash flows provided by (used in) operating activities

Provision on securities, other than trading 1 1 2 2 Net (gain) on securities, other than trading (32) (91) (86) (183) Net (increase) decrease in trading securities (7,319) 5,290 (1,624) 4,814 Provision for credit losses (Note 3) 1,054 306 2,521 619 Change in derivative instruments – (increase) decrease in derivative asset 5,863 (196) (14,158) 5,348

– increase (decrease) in derivative liability (6,918) 350 15,342 (2,595) Amortization of premises and equipment 198 110 598 326 Amortization of other assets 48 56 152 163 Amortization of intangible assets 154 135 461 406 Net (increase) decrease in deferred income tax asset (90) 84 132 386 Net increase (decrease) in deferred income tax liability 16 5 (1) 2 Net (increase) decrease in current income tax asset 90 11 (492) 257 Net (decrease) in current income tax liability (19) (6) (9) (17) Change in accrued interest – (increase) decrease in interest receivable 242 80 319 (117)

– increase (decrease) in interest payable 14 131 (198) 303 Changes in other items and accruals, net (334) (1,934) (6,870) (2,232) Net increase in deposits 19,630 9,149 88,368 33,047 Net (increase) decrease in loans 14,938 (7,568) (19,327) (34,470) Net increase (decrease) in securities sold but not yet purchased 724 (4,445) 4,081 (1,430) Net increase (decrease) in securities lent or sold under repurchase agreements (3,645) 3,772 11,616 23,561 Net (increase) decrease in securities borrowed or purchased under resale agreements (1,979) 2,528 (13,514) (22,086) Net increase (decrease) in securitization and structured entities' liabilities (101) 18 191 483

Net Cash Provided by Operating Activities 23,767 9,343 71,017 11,151

Cash Flows from Financing Activities Net increase (decrease) in liabilities of subsidiaries (5,326) 81 (8,113) (1,267) Proceeds from issuance of covered bonds - 2,290 4,425 4,168 Redemption/buyback of covered bonds (1,371) (1,511) (6,868) (3,765) Proceeds from issuance of subordinated debt (Note 5) 1,250 - 1,250 - Proceeds from issuance of preferred shares and other equity instruments (Note 6) - 658 - 1,008 Share issue expense - (4) - (8) Net proceeds from issuance (repurchase) of common shares or treasury shares (Note 6) (15) 17 (48) 43 Common shares repurchased for cancellation (Note 6) - - - (90) Cash dividends and distributions paid (516) (687) (1,974) (2,035) Repayment of lease liabilities (1) (82) - (250) -

Net Cash Provided by (Used in) Financing Activities (6,060) 844 (11,578) (1,946)

Cash Flows from Investing Activities Net (increase) decrease in interest bearing deposits with banks (950) 508 (280) 1,420 Purchases of securities, other than trading (20,449) (16,754) (73,897) (43,019) Maturities of securities, other than trading 5,050 2,749 12,539 10,538 Proceeds from sales of securities, other than trading 5,223 7,710 30,556 20,033 Premises and equipment – net (purchases) (74) (117) (273) (303) Purchased and developed software – net (purchases) (125) (153) (490) (457) Acquisitions - - (186) -

Net Cash (Used in) Investing Activities (11,325) (6,057) (32,031) (11,788)

Effect of Exchange Rate Changes on Cash and Cash Equivalents (1,385) (1,031) 379 (621)

Net increase (decrease) in Cash and Cash Equivalents 4,997 3,099 27,787 (3,204) Cash and Cash Equivalents at Beginning of Period 71,593 35,839 48,803 42,142

Cash and Cash Equivalents at End of Period $ 76,590 $ 38,938 $ 76,590 $ 38,938

Supplemental Disclosure of Cash Flow Information Net cash provided by operating activities includes:

Interest paid in the period $ 1,974 $ 3,382 $ 7,905 $ 9,648 Income taxes paid in the period $ 140 $ 432 $ 1,732 $ 1,145 Interest received in the period $ 5,241 $ 6,339 $ 16,988 $ 17,979 Dividends received in the period $ 466 $ 431 $ 1,289 $ 1,274

(1) Prior to adoption of IFRS 16, repayments of finance lease liabilities were included in “Net Cash Provided by Operating Activities“.




Notes to Consolidated Financial Statements July 31, 2020 (Unaudited)

Note 1: Basis of Presentation Bank of Montreal (“the bank”) is a chartered bank under the Bank Act (Canada) and is a public company incorporated in Canada. We are a highly

diversified financial services company, providing a broad range of personal and commercial banking, wealth management and investment banking products and services. The bank’s head office is at 129 rue Saint Jacques, Montreal, Quebec. Our executive offices are at 100 King Street West, 1 First

Canadian Place, Toronto, Ontario. Our common shares are listed on the Toronto Stock Exchange (“TSX”) and the New York Stock Exchange. These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim

Financial Reporting as issued by the International Accounting Standards Board (“IASB”) using the same accounting policies as disclosed in our annual consolidated financial statements for the year ended October 31, 2019, with the exception of the adoption of IFRS 16 Leases, IFRS Interpretations Committee Interpretation 23 Uncertainty Over Income Tax Treatments (“IFRIC 23”) and Amendments to IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”) and IFRS 7 Financial Instruments: Disclosures (“IFRS 7”), as a result of interest rate benchmark reform discussed below. These condensed interim consolidated financial statements should be read in conjunction with the notes to our annual consolidated financial statements for

the year ended October 31, 2019 as set out on pages 142 to 207 of our 2019 Annual Report. We also comply with interpretations of International Financial Reporting Standards (“IFRS”) by our regulator, the Office of the Superintendent of Financial Institutions of Canada (“OSFI”). These interim

consolidated financial statements were authorized for issue by the Board of Directors on August 25, 2020.

Changes in Accounting Policy Leases Effective November 1, 2019, we adopted IFRS 16 Leases (“IFRS 16”), which provides guidance whereby lessees are required to recognize a liability for

the present value of future lease payments and record a corresponding asset on the balance sheet for most leases. There are minimal changes to the accounting from the lessor’s perspective.

The main impact for the bank is recording real estate leases on the balance sheet. Previously most of our real estate leases were classified as operating leases, whereby we recorded the lease expense over the lease term with no asset or liability recorded on the balance sheet other than related leasehold improvements. On adoption, we elected to exclude intangibles from the scope of lease accounting.

We recalculated the right-of-use asset as if we had always applied IFRS 16 for a selection of leases and for the remaining leases, we set the right-of-use asset equal to the lease liability. We will continue to account for low dollar value leases as executory contracts with lease expense recorded

over the lease term and no corresponding right-of-use asset or lease liability. In addition, we combined lease and non-lease components (for example maintenance and utilities that have fixed payments) in the calculation of right-of-use assets and lease liabilities when applicable.

On transition, we recognized the cumulative effect of adoption in opening retained earnings as at November 1, 2019 with no changes to prior periods. The impact to the Consolidated Balance Sheet as at November 1, 2019 was an increase in premises and equipment of $1,965 million, an

increase in other liabilities of $2,024 million, and a decrease in retained earnings of $80 million ($59 million after tax).

The following table sets out a reconciliation of our operating lease commitments, as disclosed under IAS 17 Leases as at October 31, 2019, which were used to derive the lease liabilities as at November 1, 2019. (Canadian $ in millions) November 1, 2019

Operating lease commitment at October 31, 2019 as disclosed in our consolidated financial statements 3,800 Discounted using the incremental borrowing rate at November 1, 2019 (310) Finance lease liabilities recognized as at October 31, 2019 41 Recognition exemption for low-value asset leases (13) Extension and termination options reasonably certain to be exercised 37 Executory costs not included in the lease liability (166) Leases signed but not yet started (1,222)

Lease liabilities recognized at November 1, 2019 2,167

When measuring lease liabilities, we discounted lease payments using our incremental borrowing rate at November 1, 2019. The weighted-

average rate applied was 2.52%. When we enter into new arrangements as a lessee, a right-of-use asset is recognized equal to the lease liability, which is calculated based on the

future lease payments discounted at our incremental borrowing rate over the lease term. The lease term is based on the non-cancellable period and

includes any options to extend or terminate which we are reasonably certain to exercise. The right-of-use asset is depreciated on a straight-line basis, based on the shorter of useful life of the underlying asset or the lease term, and is

adjusted for impairment losses, if any. The lease liability accretes interest which is recognized in interest expense, other liabilities, based on the effective interest method over the lease

term. The lease liability is remeasured when decisions are made to exercise options under the lease arrangement or when the likelihood of exercising an option within the lease changes.

Amounts relating to leases of low value are expensed when incurred in non-interest expense, premises and equipment.


Uncertainty Over Income Tax Treatment Effective November 1, 2019, we adopted IFRIC 23. The Interpretation clarifies the recognition and measurement requirements in IAS 12 Income Taxes when there is uncertainty over income tax treatments. The Interpretation had no impact on our financial results on adoption.

Interbank Offered Rate (“IBOR”) Reform Effective November 1, 2019, we early adopted the IASB’s Phase 1 amendments to IAS 39 and IFRS 7, which provide hedge accounting relief from the uncertainty arising from IBOR reform during the period prior to replacement of IBORs. These amendments modify certain hedge accounting requirements, allowing us to assume the interest rate benchmark on which the cash flows of the hedged item and the hedging instrument are based

are not altered as a result of IBOR reform, allowing hedge accounting to continue. They also provide an exception from the requirement to discontinue hedge accounting if a hedging relationship does not meet the effectiveness requirements as a result of IBOR reform.

Mandatory application of the amendments ends at the earlier of when the uncertainty regarding the timing and amount of interest rate benchmark-based cash flows is no longer present and discontinuation of the hedging relationship.

Under IBOR reform, certain benchmark rates may be subject to discontinuance, changes in methodology, increased volatility or decreased liquidity during the transition from IBORs to alternative rates. Banks will cease rate submissions for the calculation of the London Interbank Offered Rates after

December 31, 2021. In order to manage the transition from IBORs to alternative rates, our enterprise-wide IBOR Transition Office is evaluating potential changes to

market infrastructures on our risk framework, models, systems and processes, and reviewing legal documents to ensure the bank is prepared prior to

the cessation of IBORs. We will apply judgment with respect to the need for new or revised hedging relationships; however, given market uncertainty, the assessment of the impact on the bank’s hedging relationships and its mitigation plans are in the early stages. The notional amount of the

derivatives likely subject to IBOR reform designated as hedging instruments that mature after December 31, 2021 was $85,727 million of USD LIBOR and $1,560 million of other potentially impacted IBORs as at November 1, 2019.

Future changes in IFRS Insurance Contracts In June 2020, the IASB issued amendments to IFRS 17 Insurance Contracts (“IFRS 17”), which included a deferral of the effective date, resulting in a new adoption date for the bank of November 1, 2023 instead of November 1, 2022. The amendments also simplify some requirements, such as

excluding certain credit cards from the scope of IFRS 17 and providing a policy choice to exclude certain loan contracts from IFRS 17, allowing us to continue accounting for them as we do today. We continue to assess the impact of the standard on our future financial results.

Use of Estimates and Judgments The preparation of the consolidated financial statements requires management to use estimates and assumptions that affect the carrying amounts of

certain assets and liabilities, certain amounts reported in net income and other related disclosures. The most significant assets and liabilities for which we must make estimates and judgments include the allowance for credit losses; financial instruments measured at fair value; pension and other

employee future benefits; impairment of securities; income taxes and deferred tax assets; goodwill and intangible assets; insurance-related liabilities; provisions; and transfer of financial assets and consolidation of structured entities. If actual results were to differ from the estimates, the impact would be recorded in future periods.

The full extent of the impact that COVID-19, including government and/or regulatory responses to the outbreak, will have on the Canadian and US economies and the bank’s business remains uncertain and difficult to predict at this time. By their very nature, the judgments and estimates we make

for the purposes of preparing our financial statements relate to matters that are inherently uncertain. However, we have detailed policies and internal controls that are intended to ensure these judgments and estimates are well controlled, independently reviewed, and our policies are consistently

applied from period to period. We believe that our estimates of the value of our assets and liabilities are appropriate as at July 31, 2020. Allowance for Credit Losses As detailed further in Note 1 of our annual consolidated financial statements for the year ended October 31, 2019 on page 144 of the Annual Report, the allowance for credit losses (“ACL”) consists of allowances on impaired loans, which represent estimated losses related to impaired loans in the

portfolio provided for but not yet written off, and allowances on performing loans, which is our best estimate of impairment in the existing portfolio for loans that have not yet been individually identified as impaired.

The expected credit loss model requires the recognition of credit losses generally based on 12 months of expected losses for performing loans and the recognition of lifetime losses on performing loans that have experienced a significant increase in credit risk since origination.

The determination of a significant increase in credit risk takes into account many different factors and varies by product and risk segment. The

main factors considered in making this determination are relative changes in probability of default since origination, and certain other criteria, such as 30-day past due and watchlist status. We may apply experienced credit judgment to reflect factors not captured in the ECL models, based on the

results produced by the ECL models as we deem necessary. In cases where borrowers have opted to participate in payment deferral programs we offered as a result of the COVID-19 pandemic, deferred payments are not considered to be past due and do not on their own indicate a significant

increase in credit risk. The judgments we apply in determining the ACL include changes in circumstances that may cause future assessments of credit risk to be materially

different from current assessments, which could require an increase or decrease in the allowance for credit losses. Additional information regarding the allowance for credit losses is included in Note 3.


Financial Instruments Measured at Fair Value Our fair value measurement techniques have not changed from those outlined in Note 17 of our annual consolidated financial statements for the year ended October 31, 2019 on pages 180 to 181 of the Annual Report. Additional information on fair value of financial instruments is included in Note 7.

Income Taxes and Deferred Tax Assets Deferred tax assets are recognized only when it is probable that sufficient taxable profit will be available in future periods against which deductible temporary differences or unused taxes losses and tax credits may be realized. On the evidence available, including management projections of

income, we believe that it is probable there will be sufficient taxable income generated by our business operations to recognize these deferred tax assets.

Additional information on income taxes is included in Note 11.

Goodwill and Intangible Assets As a result of the current economic conditions due to the COVID-19 pandemic and the impact on our business performance, we reassessed the recoverable value of goodwill for certain cash-generating units (“CGUs”) by updating key assumptions, including the estimated cost of capital, discount

rates as well as the actual and future business performance of the CGUs. Indefinite-life intangible assets were also reviewed for impairment. We concluded that the fair value less costs to sell continue to exceed the carrying value of these CGUs and indefinite-life intangible assets and therefore no

impairment write-downs were recorded in the three and nine-months ended July 31, 2020.

Provisions A provision, including for restructuring, is recognized if, as a result of a past event, the bank has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recorded at the best

estimate of the amounts required to settle the obligation as at the balance sheet date, taking into account the risks and uncertainties associated with the obligation. Management and external experts are involved in estimating any provision, as necessary. The actual costs of settling some obligations

may be substantially higher or lower than the amounts of the provisions. Additional information on legal proceedings is included in Note 13.

Transfer of Assets and Consolidation of Structured Entities We enter into transactions in which we transfer assets to a structured entity or third party to obtain alternate sources of funding. We assess whether

substantially all of the risks and rewards of or control over the loans have been transferred to determine if they qualify for derecognition. Where we continue to be exposed to substantially all of the repayment, interest rate and/or credit risk associated with the securitized loans, they do not qualify

for derecognition. We continue to recognize the loans and the related cash proceeds as secured financing in our Consolidated Balance Sheet. Further details of our assessment of certain government offered programs launched in response to the impact of COVID-19 against the

derecognition criteria is discussed in Note 3.


Note 2: Securities Classification of Securities The bank’s fair value through profit or loss (“FVTPL”) securities of $14,053 million ($13,704 million as at October 31, 2019) are comprised of $2,361 million mandatorily measured at fair value and $11,692 million investment securities held by insurance subsidiaries designated at fair value

($2,899 million and $10,805 million, respectively, as at October 31, 2019). Our fair value through other comprehensive income (“FVOCI”) securities totalling $78,493 million ($64,515 million as at October 31, 2019), are net

of an allowance for credit losses of $4 million ($2 million as at October 31, 2019). Amortized cost securities totalling $45,229 million ($24,472 million as at October 31, 2019), are net of an allowance for credit losses of $1 million

($1 million as at October 31, 2019).

Unrealized Gains and Losses on FVOCI Securities The following table summarizes the unrealized gains and losses:

(Canadian $ in millions) July 31, 2020 October 31, 2019

Cost/ Gross Gross Cost/ Gross Gross Amortized unrealized unrealized Amortized unrealized unrealized cost gains losses Fair value cost gains losses Fair value

Issued or guaranteed by: Canadian federal government 27,329 253 - 27,582 11,876 72 4 11,944 Canadian provincial and municipal governments 4,585 140 - 4,725 5,907 106 1 6,012 U.S. federal government 17,646 1,039 6 18,679 15,363 617 5 15,975 U.S. states, municipalities and agencies 5,196 169 2 5,363 4,091 74 4 4,161 Other governments 6,949 205 4 7,150 7,179 158 2 7,335

National Housing Act (“NHA”) mortgage-backed securities (“MBS”) 1,614 51 2 1,663 1,953 18 1 1,970 U.S. agency MBS and collateralized mortgage obligations (“CMO”) 9,543 336 4 9,875 11,966 106 42 12,030 Corporate debt 3,241 129 1 3,369 4,899 110 2 5,007 Corporate equity 85 2 - 87 79 2 - 81

Total 76,188 2,324 19 78,493 63,313 1,263 61 64,515

Unrealized gains (losses) may be offset by related (losses) gains on hedge contracts.

Interest Income on Debt Securities The following table presents interest income calculated using the effective interest method:

(Canadian $ in millions) For the three months ended For the nine months ended

July 31, 2020 July 31, 2019 July 31, 2020 July 31, 2019

FVOCI - Debt 185 403 823 1,202 Amortized cost 144 75 455 163

Total 329 478 1,278 1,365


Note 3: Loans and Allowance for Credit Losses Credit Risk Exposure The following table sets out our credit risk exposure for all loans carried at amortized cost, FVOCI or FVTPL as at July 31, 2020 and October 31, 2019. Stage 1 represents those performing loans carried with up to a 12 month expected credit loss, Stage 2 represents those performing loans carried with

a lifetime expected credit loss, and Stage 3 represents those loans with a lifetime credit loss that are credit impaired.


Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total

Loans: Residential mortgages Exceptionally low 1 - - 1 - - - - Very low 79,472 278 - 79,750 79,011 242 - 79,253 Low 22,654 2,765 - 25,419 20,853 2,821 - 23,674 Medium 11,594 6,560 - 18,154 13,651 4,578 - 18,229 High 91 362 - 453 124 397 - 521 Not rated 1,082 192 - 1,274 1,531 118 - 1,649 Impaired - - 430 430 - - 414 414

Allowance for credit losses 65 58 17 140 15 32 17 64

Carrying amount 114,829 10,099 413 125,341 115,155 8,124 397 123,676

Loans: Consumer instalment and other personal Exceptionally low 1,584 33 - 1,617 21,023 25 - 21,048 Very low 25,827 43 - 25,870 16,491 194 - 16,685 Low 20,281 873 - 21,154 9,894 346 - 10,240 Medium 9,921 4,856 - 14,777 10,510 4,264 - 14,774 High 367 1,493 - 1,860 397 1,423 - 1,820 Not rated 3,349 108 - 3,457 2,594 107 - 2,701 Impaired - - 433 433 - - 468 468


Carrying amount 61,214 6,986 306 68,506 60,827 6,041 332 67,200

Loans: Credit cards Exceptionally low 2,155 - - 2,155 2,418 - - 2,418 Very low 1,076 16 - 1,092 1,214 16 - 1,230 Low 904 164 - 1,068 970 158 - 1,128 Medium 1,700 965 - 2,665 2,020 876 - 2,896 High 49 388 - 437 140 440 - 580 Not rated 530 - - 530 606 1 - 607 Impaired - - - - - - - -

Allowance for credit losses 60 270 - 330 43 193 - 236

Carrying amount 6,354 1,263 - 7,617 7,325 1,298 - 8,623

Loans: Business and government (1) Acceptable

Investment grade 124,728 6,757 - 131,485 134,587 1,028 - 135,615 Sub-investment grade 93,201 27,697 - 120,898 96,731 11,553 - 108,284

Watchlist - 8,082 - 8,082 - 5,556 - 5,556 Impaired - - 3,550 3,550 - - 1,747 1,747

Allowance for credit losses 573 971 575 2,119 263 441 310 1,014

Carrying amount 217,356 41,565 2,975 261,896 231,055 17,696 1,437 250,188

Commitments and financial guarantee contracts Acceptable

Investment grade 132,838 1,491 - 134,329 134,920 884 - 135,804 Sub-investment grade 42,765 17,614 - 60,379 45,178 6,435 - 51,613

Watchlist - 3,419 - 3,419 - 2,133 - 2,133 Impaired - - 1,164 1,164 - - 324 324


Carrying amount (2) 175,391 22,292 1,152 198,835 179,979 9,349 302 189,630

(1) Includes customers’ liability under acceptances.

(2) Represents the total contractual amounts of undrawn credit facilities and other off-balance sheet exposures, excluding personal lines of credit and credit cards that are unconditionally cancellable at our discretion.

Allowance for Credit Losses (“ACL”) The allowance for credit losses recorded in our Consolidated Balance Sheet is maintained at a level we consider adequate to absorb credit-related losses on our loans and other credit instruments. The allowance for credit losses amounted to $3,707 million at July 31, 2020 ($2,094 million at

October 31, 2019) of which $3,251 million ($1,850 million at October 31, 2019) was recorded in loans and $456 million ($244 million at October 31, 2019) was recorded in other liabilities in our Consolidated Balance Sheet.

Significant changes in the gross balances, including originations, maturities and repayments in the normal course of operations, impact the allowance for credit losses.


The following table shows the continuity in the loss allowance by product type. Transfers represent the amount of expected credit loss (“ECL”) that moved between stages during the period, for example, moving from a 12-month (Stage 1) to lifetime (Stage 2) ECL measurement basis. Net

remeasurements represent the ECL impact due to stage transfers, changes in economic forecasts and credit quality.

(Canadian $ in millions) For the three months ended July 31, 2020 July 31, 2019 Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total

Loans: Residential mortgages Balance as at beginning of period 29 37 27 93 16 37 44 97 Transfer to Stage 1 8 (7) (1) - 7 (6) (1) - Transfer to Stage 2 (1) 4 (3) - (1) 2 (1) - Transfer to Stage 3 - (1) 1 - - (3) 3 - Net remeasurement of loss allowance 27 30 10 67 (9) 6 - (3) Loan originations 4 - - 4 2 - - 2 Derecognitions and maturities - (2) - (2) (1) (1) - (2) Model changes (1) (3) - (4) - - - - Total Provision for Credit Losses ("PCL") (1) 37 21 7 65 (2) (2) 1 (3) Write-offs (2) - - (3) (3) - - (6) (6) Recoveries of previous write-offs - - 2 2 - - 7 7 Foreign exchange and other (1) - (6) (7) - - (8) (8)

Balance as at end of period 65 58 27 150 14 35 38 87

Loans: Consumer instalment and other personal Balance as at beginning of period 116 407 125 648 86 324 128 538 Transfer to Stage 1 59 (57) (2) - 44 (42) (2) - Transfer to Stage 2 (10) 21 (11) - (4) 18 (14) - Transfer to Stage 3 (1) (27) 28 - (1) (32) 33 - Net remeasurement of loss allowance (50) 103 56 109 (40) 66 52 78 Loan originations 9 - - 9 12 - - 12 Derecognitions and maturities (4) (9) - (13) (4) (13) - (17) Model changes 11 8 - 19 - - - - Total PCL (1) 14 39 71 124 7 (3) 69 73 Write-offs (2) - - (81) (81) - - (80) (80) Recoveries of previous write-offs - - 22 22 - - 25 25 Foreign exchange and other (3) (3) (10) (16) (1) (1) (7) (9)


Loans: Credit cards Balance as at beginning of period 115 319 - 434 77 231 - 308 Transfer to Stage 1 50 (50) - - 28 (28) - - Transfer to Stage 2 (9) 9 - - (5) 5 - - Transfer to Stage 3 - (48) 48 - (1) (46) 47 - Net remeasurement of loss allowance (44) 105 20 81 (24) 79 24 79 Loan originations 5 - - 5 5 - - 5 Derecognitions and maturities (1) (7) - (8) (1) (6) - (7) Model changes (1) (10) - (11) - - - - Total PCL (1) - (1) 68 67 2 4 71 77 Write-offs (2) - - (80) (80) - - (91) (91) Recoveries of previous write-offs - - 19 19 - - 20 20 Foreign exchange and other (3) (1) (7) (11) - 1 - 1

Balance as at end of period 112 317 - 429 79 236 - 315

Loans: Business and government Balance as at beginning of period 580 795 586 1,961 336 423 260 1,019 Transfer to Stage 1 45 (45) - - 31 (30) (1) - Transfer to Stage 2 (65) 66 (1) - (16) 17 (1) - Transfer to Stage 3 (4) (163) 167 - (1) (14) 15 - Net remeasurement of loss allowance 145 510 134 789 (23) 91 89 157 Loan originations 53 - - 53 53 - - 53 Derecognitions and maturities (21) (36) - (57) (28) (22) - (50) Model changes (7) (4) - (11) - - - - Total PCL (1) 146 328 300 774 16 42 102 160 Write-offs (2) - - (300) (300) - - (52) (52) Recoveries of previous write-offs - - 37 37 - - 2 2 Foreign exchange and other (5) 10 (46) (41) (1) (4) (15) (20)

Balance as at end of period 721 1,133 577 2,431 351 461 297 1,109

Total as at end of period 1,025 1,951 731 3,707 536 1,052 470 2,058

Comprised of: Loans 813 1,719 719 3,251 409 946 447 1,802

Other credit instruments (3) 212 232 12 456 127 106 23 256

(1) Excludes PCL on other assets of $24 million for the three months ended July 31, 2020 ($(1) million for the three months ended July 31, 2019).

(2) Generally, we continue to seek recovery on amounts that were written off during the year, unless the loan is sold, we no longer have the right to collect or we have exhausted all reasonable efforts to collect. (3) Recorded in other liabilities on the Consolidated Balance Sheet.


The following table shows the continuity in the loss allowance by each product type:

(Canadian $ in millions)

For the nine months ended July 31, 2020 July 31, 2019

Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total

Loans: Residential mortgages Balance as at beginning of period 15 33 38 86 20 38 44 102 Transfer to Stage 1 19 (17) (2) - 21 (19) (2) - Transfer to Stage 2 (2) 7 (5) - (2) 5 (3) - Transfer to Stage 3 - (4) 4 - - (7) 7 - Net remeasurement of loss allowance 29 47 17 93 (29) 21 7 (1) Loan originations 8 - - 8 5 - - 5 Derecognitions and maturities (1) (4) - (5) (1) (3) - (4) Model changes (3) (5) - (8) - - - - Total PCL (1) 50 24 14 88 (6) (3) 9 - Write-offs (2) - - (9) (9) - - (13) (13) Recoveries of previous write-offs - - 6 6 - - 12 12 Foreign exchange and other - 1 (22) (21) - - (14) (14)


Loans: Consumer instalment and other personal Balance as at beginning of period 89 333 136 558 90 326 144 560 Transfer to Stage 1 138 (131) (7) - 131 (122) (9) - Transfer to Stage 2 (20) 66 (46) - (13) 62 (49) - Transfer to Stage 3 (3) (79) 82 - (4) (84) 88 - Net remeasurement of loss allowance (112) 247 162 297 (134) 168 112 146 Loan originations 32 - - 32 35 - - 35 Derecognitions and maturities (12) (27) - (39) (12) (30) - (42) Model changes 16 33 - 49 - - - - Total PCL (1) 39 109 191 339 3 (6) 142 139 Write-offs (2) - - (248) (248) - - (233) (233) Recoveries of previous write-offs - - 64 64 - - 97 97 Foreign exchange and other (1) 1 (16) (16) (1) - (15) (16)


Loans: Credit cards Balance as at beginning of period 80 225 - 305 74 219 - 293 Transfer to Stage 1 107 (107) - - 78 (78) - - Transfer to Stage 2 (25) 25 - - (16) 16 - - Transfer to Stage 3 (1) (129) 130 - (1) (125) 126 - Net remeasurement of loss allowance (57) 332 68 343 (68) 221 58 211 Loan originations 13 - - 13 15 - - 15 Derecognitions and maturities (3) (19) - (22) (3) (18) - (21) Model changes (1) (10) - (11) - - - - Total PCL (1) 33 92 198 323 5 16 184 205 Write-offs (2) - - (257) (257) - - (250) (250) Recoveries of previous write-offs - - 66 66 - - 66 66 Foreign exchange and other (1) - (7) (8) - 1 - 1

Balance as at end of period 112 317 - 429 79 236 - 315

Loans: Business and government Balance as at beginning of period 338 496 311 1,145 298 408 209 915 Transfer to Stage 1 109 (102) (7) - 139 (135) (4) - Transfer to Stage 2 (118) 121 (3) - (41) 53 (12) - Transfer to Stage 3 (6) (226) 232 - (1) (41) 42 - Net remeasurement of loss allowance 321 883 558 1,762 (141) 230 159 248 Loan originations 153 - - 153 163 - - 163 Derecognitions and maturities (63) (86) - (149) (75) (57) - (132) Model changes (30) 8 - (22) - - - - Total PCL (1) 366 598 780 1,744 44 50 185 279 Write-offs (2) - - (516) (516) - - (123) (123) Recoveries of previous write-offs - - 60 60 - - 61 61 Foreign exchange and other 17 39 (58) (2) 9 3 (35) (23)

Balance as at end of period 721 1,133 577 2,431 351 461 297 1,109

Total as at end of period 1,025 1,951 731 3,707 536 1,052 470 2,058

Comprised of: Loans 813 1,719 719 3,251 409 946 447 1,802

Other credit instruments (3) 212 232 12 456 127 106 23 256

(1) Excludes PCL on other assets of $27 million for the nine months ended July 31, 2020 ($(4) million for the nine months ended July 31, 2019). (2) Generally, we continue to seek recovery on amounts that were written off during the year, unless the loan is sold, we no longer have the right to collect or we have exhausted all reasonable efforts to collect.

(3) Recorded in other liabilities on the Consolidated Balance Sheet.


Loans and allowance for credit losses by geographic region as at July 31, 2020 and October 31, 2019 are as follows:


Gross Allowance for credit losses Allowance for credit losses Net Gross Allowance for credit losses Allowance for credit losses Net amount on impaired loans (2) on performing loans (3) Amount amount on impaired loans (2) on performing loans (3) Amount

By geographic region (1): Canada 270,348 345 1,335 268,668 258,842 207 740 257,895 United States 166,278 374 1,164 164,740 158,454 256 630 157,568 Other countries 11,953 - 33 11,920 10,648 - 17 10,631

Total 448,579 719 2,532 445,328 427,944 463 1,387 426,094

(1) Geographic region is based upon country of ultimate risk.

(2) Excludes allowance for credit losses on impaired loans of $12 million for other credit instruments, which is included in other liabilities ($22 million as at October 31, 2019).

(3) Excludes allowance for credit losses on performing loans of $444 million for other credit instruments, which is included in other liabilities ($222 million as at October 31, 2019).

Impaired (Stage 3) loans, including the related allowances, as at July 31, 2020 and October 31, 2019 are as follows:


Gross impaired

amount (3) Allowance for credit losses on

impaired loans (4) Net impaired

amount (3) Gross impaired

amount (3) Allowance for credit losses

on impaired loans (4) Net impaired

amount (3)

Residential mortgages 430 17 413 414 17 397 Consumer instalment and other personal 433 127 306 468 136 332 Business and government (1) 3,550 575 2,975 1,747 310 1,437

Total 4,413 719 3,694 2,629 463 2,166

By geographic region (2): Canada 1,469 345 1,124 914 207 707 United States 2,885 374 2,511 1,715 256 1,459 Other countries 59 - 59 - - -

Total 4,413 719 3,694 2,629 463 2,166

(1) Includes customers’ liability under acceptances.

(2) Geographic region is based upon the country of ultimate risk.

(3) Gross impaired loans and net impaired loans exclude purchased credit impaired loans. (4) Excludes allowance for credit losses on impaired loans of $12 million for other credit instruments, which is included in other liabilities ($22 million as at October 31, 2019).

Loans Past Due Not Impaired Loans that are past due but not classified as impaired are loans where our customers have failed to make payments when contractually due but for

which we expect the full amount of principal and interest payments to be collected, or loans which are held at fair value. The following table presents loans that are past due but not classified as impaired as at July 31, 2020 and October 31, 2019. In cases where borrowers have opted to participate in payment deferral programs we offered as a result of the COVID-19 pandemic, deferred payments are not considered past due and do not on their own

indicate a significant increase in credit risk. As a result, they have not been included in the table below. (Canadian $ in millions) July 31, 2020 October 31, 2019

1 to 29 days 30 to 89 days 90 days or more Total 1 to 29 days 30 to 89 days 90 days or more Total

Residential mortgages 598 335 28 961 806 465 16 1,287 Credit card, consumer instalment and other personal 1,261 328 81 1,670 1,590 426 87 2,103 Business and government 387 293 32 712 351 207 59 617

Total 2,246 956 141 3,343 2,747 1,098 162 4,007

Fully secured loans with amounts past due between 90 and 180 days that we have not classified as impaired totalled $43 million and $54 million as at July 31, 2020 and October 31, 2019, respectively.

ECL Sensitivity and Key Economic Variables The expected credit loss model requires the recognition of credit losses generally based on 12 months of expected losses for performing loans and the recognition of lifetime losses on performing loans that have experienced a significant increase in credit risk since origination.

The allowance for performing loans is sensitive to changes in both economic forecasts and the probability-weight assigned to each forecast scenario. We incorporate multiple economic forecasts and those used are representative of our view of future economic conditions and considering

external data, developed internally by our Economics group. Many of the variables used in our forecasts have a high degree of interdependency, and as such there is no single factor to which loan impairment allowances as a whole are sensitive. We apply experienced credit judgment to reflect factors

not captured in the ECL models as we deem necessary. In Q3 2020, we have applied experienced credit judgment to reflect the impact of the extraordinary and highly uncertain environment on credit conditions and the economy.

As at July 31, 2020, our base case economic forecast depicts a contracting Canadian economy, with real GDP falling in 2020 as a result of a sharp

decline in the first half of the year, as a result of the COVID-19 pandemic. This is in contrast to our base case economic forecast as at October 31, 2019 which depicted moderate economic growth in both Canada and the U.S. over the projection period. In addition, the outlook for the economy and labour

markets is moderately weaker compared to the second quarter of 2020. If we assume a 100% base case economic forecast and include the impact of loan migration by restaging, with other assumptions held constant, including the application of experienced credit judgment, the allowance on

performing loans would be approximately $2,725 million as at July 31, 2020 ($1,325 million as at October 31, 2019), compared to the reported allowance for performing loans of $2,976 million ($1,609 million as at October 31, 2019).

As at July 31, 2020, our adverse case economic forecast also depicts a contracting Canadian economy, with real GDP declining in 2020, with an increase in 2021. In our adverse case scenario, the dislocations caused by the pandemic are more significant and persist for a longer period of time compared with our base case scenario. This is in contrast to the adverse scenario forecast as at October 31, 2019 which depicted a typical recession,

with the economy contracting in the first year followed by a steady recovery through the end of the projection period. If we assume a 100% adverse economic forecast and include the impact of loan migration by restaging, with other assumptions held constant, including the application of


experienced credit judgment, the allowance on performing loans would be approximately $3,550 million as at July 31, 2020 ($2,800 million as at October 31, 2019), compared to the reported allowance for performing loans of $2,976 million ($1,609 million as at October 31, 2019).

The following table shows the key economic variables we use to estimate our allowance on performing loans during the forecast period. This table is typically provided on an annual basis. However, given the significant level of change in the forward-looking information since the end of 2019, the disclosures have been provided as an update to the bank’s Annual Report for the year ended October 31, 2019. The values shown represent the

national average values for calendar 2020 and calendar 2021. The base case scenario reflects our view of the most probable outcome. While the values disclosed below are national variables, we use regional variables in our underlying models where considered appropriate and consider factors

impacting particular industries.

Benign scenario Base scenario Adverse scenario (1) 2020 2021 2020 2021 2020 2021

All figures are average annual values

July 31, 2020

October 31, 2019

July 31, 2020

October 31, 2019

July 31, 2020

October 31, 2019

July 31, 2020

October 31, 2019

July 31, 2020

October 31, 2019

July 31, 2020

October 31, 2019

Real gross domestic product (2)

Canada (4.6)% 2.9% 8.9% 2.5% (6.0)% 1.7% 6.0% 1.6% (7.6)% (2.3)% 3.7% 0.5% United States (4.1)% 2.4% 7.8% 2.4% (5.5)% 1.8% 5.0% 1.9% (7.1)% (2.0)% 2.5% 0.6%

Corporate BBB 10-year spread

Canada 2.1% 2.0% 1.9% 2.1% 2.4% 2.3% 2.3% 2.3% 2.8% 4.5% 3.1% 4.1% United States 2.2% 1.8% 1.9% 2.0% 2.5% 2.3% 2.4% 2.4% 3.0% 4.1% 3.2% 3.6%

Unemployment rates Canada 8.5% 5.1% 6.5% 5.0% 9.5% 5.7% 8.0% 5.9% 10.9% 8.5% 10.0% 9.0% United States 7.5% 3.3% 5.4% 3.2% 8.9% 3.7% 7.0% 3.8% 10.3% 6.1% 8.9% 6.8%

Housing Price Index ("HPI") (2) Canada (3) 5.3% 3.7% 5.4% 3.7% 3.5% 2.0% 0.0% 2.5% 0.8% (12.3)% (7.5)% (4.7)% United States (4) 2.4% 4.4% 4.6% 4.2% 1.0% 3.0% 1.6% 2.7% (0.4)% (5.7)% (1.9)% (2.2)%

(1) In Q4 2019, the adverse scenario was reflective of a typical recession that extends for four quarters. However, beginning Q2 2020, the adverse scenario used is reflective of a more adverse outcome compared with our base case forecast.

(2) Real gross domestic product and housing price index are year-over-year growth rates.

(3) In Canada, we use the HPI Benchmark Composite.

(4) In the United States, we use the National Case-Shiller House Price Index.

The ECL approach requires the recognition of credit losses generally based on 12 months of expected losses for performing loans (Stage 1) and the

recognition of lifetime expected losses for performing loans that have experienced a significant increase in credit risk since origination (Stage 2). Under our current probability-weighted scenarios and based on the current risk profile of our loan exposures, if all our performing loans were in Stage 1, our

allowance for performing loans would be approximately $2,300 million ($1,050 million as at October 31, 2019), compared with the reported allowance for performing loans of $2,976 million ($1,609 million as at October 31, 2019).

Transfer of Assets In the normal course, we sell Canadian mortgage loans to third-party Canadian securitization programs. Beginning in the second quarter, we participated in the Insured Mortgage Purchase Program (“IMPP”), launched by the Government of Canada as part of their response to COVID-19.

Under the IMPP, we assessed whether substantially all of the risks and rewards of the loans have been transferred, in order to determine if the

mortgages qualify for derecognition. Since we continue to be exposed to substantially all of the risks and rewards of ownership associated with these securitized mortgages, they do not qualify for derecognition. We continue to recognize the loans and recognize the related cash proceeds as secured

financing in our Consolidated Balance Sheet. The government also launched the Canada Emergency Business Account (“CEBA”) Program in the second quarter, where we issue loans that are

funded by the government. We determined these loans qualify for derecognition as the risks and rewards were transferred to the government, therefore we do not recognize these loans on our Consolidated Balance Sheet.

Note 4: Risk Management We have an enterprise-wide approach to the identification, measurement, monitoring and control of risks faced across our organization. The key risks related to our financial instruments are classified as credit and counterparty, market, and liquidity and funding risk. Our risk management policies and

processes have not changed significantly from those outlined in the Enterprise-Wide Risk Management sections on pages 68 to 106 of the bank’s Annual Report for the year ended October 31, 2019. However, the COVID-19 pandemic has resulted in an increase in certain risks outlined in the Risk

Management section of our interim Management’s Discussion and Analysis. We have provided an update on each of the key risks below.

Credit and Counterparty Risk Credit and counterparty risk is the potential for loss due to the failure of a borrower, endorser, guarantor or counterparty to repay a loan or honour another predetermined financial obligation. Credit risk arises predominantly with respect to loans, over-the-counter and centrally cleared derivatives

and other credit instruments. This is the most significant measurable risk that we face. Updated information on credit risk related to loans is included in Note 3.


Market Risk Market risk is the potential for adverse changes in the value of our assets and liabilities resulting from changes in market variables such as interest rates, foreign exchange rates, equity prices, dividend policies and commodity prices and their implied volatilities, and credit spreads, and includes the

risk of credit migration and default in our trading book. We incur market risk in our trading and underwriting activities and in the management of structural market risk in our banking and insurance activities. Updated market risk measures are included on page 36 of our interim Management’s

Discussion and Analysis.

Liquidity and Funding Risk Liquidity and funding risk is the potential for loss if we are unable to meet our financial commitments in a timely manner at reasonable prices as they

become due. It is our policy to ensure that sufficient liquid assets and funding capacity are available to meet financial commitments, including liabilities to depositors and suppliers, and lending, investment and pledging commitments, even in times of stress. Managing liquidity and funding risk is essential to maintaining a safe and sound enterprise, depositor confidence and earnings stability. Updated contractual maturities of assets, liabilities

and off-balance sheet commitments, a tool used to manage liquidity and funding risk, are included on pages 43 and 44 of our interim Management’s Discussion and Analysis.

Note 5: Deposits and Subordinated Debt Deposits Payable on demand Payable Payable on

(Canadian $ in millions) Interest bearing Non-interest bearing after notice a fixed date (4)(5) Total

July 31, October 31, July 31, October 31, July 31, October 31, July 31, October 31, July 31, October 31, 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019

Deposits by: Banks (1) (6) 3,245 1,996 1,773 1,530 1,240 1,017 35,641 19,273 41,899 23,816 Business and government 45,320 29,083 41,901 33,853 115,048 85,022 195,436 195,199 397,705 343,157 Individuals 4,213 3,361 28,729 23,084 107,521 94,304 80,533 80,421 220,996 201,170

Total (2) (3) 52,778 34,440 72,403 58,467 223,809 180,343 311,610 294,893 660,600 568,143

Booked in: Canada 39,943 27,338 62,427 49,911 107,555 90,630 201,878 181,835 411,803 349,714

United States 11,254 6,043 9,935 8,531 114,926 88,604 77,713 86,368 213,828 189,546 Other countries 1,581 1,059 41 25 1,328 1,109 32,019 26,690 34,969 28,883

Total 52,778 34,440 72,403 58,467 223,809 180,343 311,610 294,893 660,600 568,143

(1) Includes regulated and central banks.

(2) Includes structured notes designated at fair value through profit or loss (Note 7).

(3) As at July 31, 2020 and October 31, 2019, total deposits payable on a fixed date included $40,757 million and $25,438 million, respectively, of federal funds purchased and commercial paper issued and other

deposit liabilities. Included in deposits as at July 31, 2020 and October 31, 2019 are $318,088 million and $279,860 million, respectively, of deposits denominated in U.S. dollars, and $38,861 million and

$36,680 million, respectively, of deposits denominated in other foreign currencies.

(4) Includes $276,218 million of deposits, each greater than one hundred thousand dollars, of which $173,167 million were booked in Canada, $71,037 million were booked in the United States and $32,014 million were booked in other countries ($258,862 million, $152,499 million, $79,682 million and $26,681 million, respectively, as at October 31, 2019). Of the $173,167 million of deposits booked in Canada,

$27,729 million mature in less than three months, $11,351 million mature in three to six months, $41,220 million mature in six to twelve months and $92,867 million mature after twelve months

($152,499 million, $26,234 million, $8,400 million, $31,155 million and $86,710 million, respectively, as at October 31, 2019). Certain comparative figures have been reclassified to conform with the current

period’s presentation.

(5) Includes $24,990 million of senior unsecured debt as at July 31, 2020 subject to the Bank Recapitalization (Bail-In) regime ($16,248 million as at October 31, 2019). The Bail-In regime provides certain statutory

powers to the Canada Deposit Insurance Corporation, including the ability to convert specified eligible shares and liabilities into common shares if the bank becomes non-viable.

(6) Includes $12,741 million of deposits with the Bank of Canada, where we have used our own bearer deposit notes as collateral under its term repo facility ($nil as at October 31, 2019).

Subordinated Debt On June 17, 2020, we issued $1,250 million of 2.077% unsecured subordinated notes under our Canadian Medium-Term Note Program. The issue, Series J Medium-Term Notes Second Tranche, is due June 17, 2030. The notes reset to a floating rate on June 17, 2025.

During the three and nine months ended July 31, 2020, we did not redeem any subordinated debt.


Note 6: Equity Preferred and Common Shares Outstanding and Other Equity Instruments (1)

(Canadian $ in millions, except as noted) July 31, 2020 October 31, 2019

Number Number

of shares Amount of shares Amount Convertible into…

Preferred Shares - Classified as Equity Class B – Series 25 9,425,607 236 9,425,607 236 Class B - Series 26 (2)

Class B – Series 26 2,174,393 54 2,174,393 54 Class B - Series 25 (2)

Class B – Series 27 20,000,000 500 20,000,000 500 Class B - Series 28 (2)(3)




Class B – Series 35 6,000,000 150 6,000,000 150 Not convertible (3)

Class B – Series 36 600,000 600 600,000 600 Class B - Series 37 (2)(3)






Preferred Shares - Classified as Equity 4,690 4,690 Other Equity Instruments (4) 658 658

Common Shares (5) (6) (7) 642,804,880 13,200 639,232,276 12,971

Share Capital and Other Equity Instruments 18,548 18,319

(1) For additional information refer to Notes 16 and 20 of our annual consolidated financial statements for the year ended October 31, 2019 on pages 177 and 188 of our 2019 Annual Report.

(2) If converted, the holders have the option to convert back to the original preferred shares on subsequent redemption dates.

(3) The shares issued include a non-viability contingent capital provision, which is necessary for the shares to qualify as regulatory capital under Basel III. As such, the shares are convertible into a variable number of

our common shares if OSFI announces that the bank is, or is about to become, non-viable or if a federal or provincial government in Canada publicly announces that the bank has accepted or agreed to accept a capital injection, or equivalent support, to avoid non-viability. In such an event, each preferred share is convertible into common shares pursuant to an automatic conversion formula and a conversion price based

on the greater of: (i) a floor price of $5.00 and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the TSX. The number of common

shares issued is determined by dividing the share value of the preferred share issuance (including declared and unpaid dividends on such preferred share issuance) by the conversion price and then times the

multiplier.

(4) The other equity instruments (notes) issued include a non-viability contingent capital provision, which is necessary for the notes to qualify as regulatory capital under Basel III. As such, the notes are convertible

into a variable number of our common shares if OSFI announces that the bank is, or is about to become, non-viable or if a federal or provincial government in Canada publicly announces that the bank has

accepted or agreed to accept a capital injection, or equivalent support, to avoid non-viability. In such an event, the notes are convertible into common shares of the bank determined by dividing (a) the product

of the Multiplier of 1.25, and the Note Value, by (b) the Conversion Price which is the greater of the Floor price of $5 and the current market price.

(5) The stock options issued under the Stock Option Plan are convertible into 6,635,228 common shares as at July 31, 2020 (6,108,307 common shares as at October 31, 2019).

(6) During the three and nine months ended July 31, 2020, we issued 3,355,394 common shares under the Shareholder Dividend Reinvestment and Share Purchase Plan and 8,614 and 423,737 common shares under the Stock Option Plan.

(7) Common shares are net of 206,527 treasury shares as at July 31, 2020.

Other Equity Instruments The bank’s US$500 million (CAD$658 million) 4.800% Additional Tier 1 Capital Notes (“notes”) are classified as equity and form part of our additional Tier 1 non-viability contingent capital. The notes are compound financial instruments that have both equity and liability features. On the date of issuance, we assigned an insignificant value to the liability component of the notes and, as a result, the full amount of proceeds has been classified as

equity. Semi-annual distributions on the notes will be recorded as a reduction in retained earnings when payable in May and December. The rights of the holders of our notes are subordinate to the claims of the depositors and certain other creditors but rank above our common and preferred shares.

Preferred Shares On June 29, 2020, we announced that we did not intend to exercise our right to redeem the current outstanding Non-Cumulative 5-Year Rate Reset Class B Preferred Shares Series 33 (“Preferred Shares Series 33”) on August 25, 2020. As a result, subject to certain conditions, the holders of Preferred Shares Series 33 had the right, at their option, by August 10, 2020, to convert any or all of their Preferred Shares Series 33 on a one-for-one basis into

Non-Cumulative Floating Rate Class B Preferred Shares Series 34 (“Preferred Shares Series 34”). During the conversion period, July 27, 2020 to August 10, 2020, 118,563 Preferred Shares Series 33 were tendered for conversion into Preferred Shares Series 34, which is less than the minimum 1,000,000

required to give effect to the conversion, as described in the Preferred Shares Series 33 prospectus supplement dated May 29, 2015. As a result, no Preferred Shares Series 34 were issued and holders of Preferred Shares Series 33 retained their shares. The dividend rate for the Preferred Shares

Series 33 for the five year period commencing on August 25, 2020, and ending on August 24, 2025, is 3.054%. During the three and nine months ended July 31, 2020, we did not issue or redeem any preferred shares.

Common Shares On February 25, 2020, we announced our intention, subject to the approval of OSFI and the Toronto Stock Exchange, to establish a new normal course

issuer bid (“NCIB”) that will permit us to purchase for cancellation up to 12 million common shares over a 12-month period, commencing on or about June 3, 2020. As previously noted, in light of OSFI’s announcement on March 13, 2020 that all share buybacks by federally regulated financial

institutions should be halted for the time being, we have put the process on hold. We will proceed with the new NCIB based on OSFI’s future guidance. Our previous NCIB expired on June 2, 2020.


Shareholder Dividend Reinvestment and Share Purchase Plan On August 25, 2020, we announced that commencing with common share dividend declared for the fourth quarter of fiscal 2020, and subsequently until further notice, common shares under the Shareholder Dividend Reinvestment and Share Purchase Plan (the “Plan”) will be purchased on the open

market without a discount. During the three and nine months ended July 31, 2020, we issued 3,355,394 common shares under the Plan.

Note 7: Fair Value of Financial Instruments Fair Value of Financial Instruments Not Carried at Fair Value on the Balance Sheet Set out in the following table are the amounts that would be reported if all financial assets and liabilities not currently carried at fair value were

reported at their fair values. Refer to Note 17 to our annual consolidated financial statements for the year ended October 31, 2019 on pages 179 to 186 for further discussion on the determination of fair value.


Carrying value Fair value Carrying value Fair value

Securities Amortized cost 45,229 45,875 24,472 24,622 Loans (1)

Residential mortgages 125,341 127,108 123,676 124,093 Consumer instalment and other personal 68,506 69,181 67,200 67,516 Credit cards 7,617 7,617 8,623 8,623 Business and government (2) 240,352 242,295 224,442 225,145

441,816 446,201 423,941 425,377 Deposits (3) 643,133 645,402 552,314 553,444 Securitization and structured entities' liabilities 27,461 28,159 27,159 27,342 Subordinated debt 8,513 8,790 6,995 7,223

This table excludes financial instruments with a carrying value approximating fair value, such as cash and cash equivalents, interest bearing deposits with banks, securities borrowed or purchased under resale

agreements, customers’ liability under acceptances, other assets, acceptances, securities lent or sold under repurchase agreements and other liabilities.

(1) Carrying value of loans is net of allowance. (2) Excludes $3,562 million of loans classified as FVTPL and $50 million of loans classified as FVOCI as at July 31, 2020, respectively ($2,156 million and $22 million as at October 31, 2019).

(3) Excludes $17,467 million of structured note liabilities designated at FVTPL and accounted for at fair value ($15,829 million as at October 31, 2019).

Fair Value Hierarchy We use a fair value hierarchy to categorize financial instruments according to the inputs we use in valuation techniques to measure fair value.

Valuation Techniques and Significant Inputs We determine the fair value of publicly traded fixed maturity debt and equity securities using quoted prices in active markets (Level 1) when these are available. When quoted prices in active markets are not available, we determine the fair value of financial instruments using models such as

discounted cash flows with observable market data for inputs such as yield and prepayment rates or broker quotes and other third-party vendor quotes (Level 2). Fair value may also be determined using models where significant market inputs are not observable due to inactive markets or minimal

market activity (Level 3). We maximize the use of observable market inputs to the extent possible. We have considered the current market conditions due to COVID-19 and their impact on the determination of fair value, applying judgment in the selection of inputs where applicable.

Our Level 2 trading and FVOCI securities are primarily valued using discounted cash flow models with observable spreads or third-party vendor quotes. Level 2 structured note liabilities are valued using models with observable market information. Level 2 derivative assets and liabilities are valued using industry standard models and observable market information.


The extent of our use of actively quoted market prices (Level 1), internal models using observable market information as inputs (Level 2) and models without observable market information as inputs (Level 3) in the valuation of securities, business and government loans classified as FVTPL, fair

value liabilities, derivative assets and derivative liabilities is presented in the following tables:


Valued using Valued using Valued using Valued using Valued using Valued using quoted models (with models (without quoted models (with models (without market observable observable market observable observable

prices inputs) inputs) Total prices inputs) inputs) Total

Trading Securities Issued or guaranteed by:

Canadian federal government 4,746 3,898 - 8,644 6,959 1,371 - 8,330 Canadian provincial and municipal governments 2,056 6,967 - 9,023 3,871 3,656 - 7,527 U.S. federal government 8,000 1,210 - 9,210 8,001 762 - 8,763 U.S. states, municipalities and agencies 38 370 - 408 48 626 - 674 Other governments 1,406 1,485 - 2,891 888 697 - 1,585

NHA MBS, U.S. agency MBS and CMO 5 9,113 584 9,702 14 10,494 538 11,046 Corporate debt 3,694 6,765 - 10,459 2,620 5,091 7 7,718 Trading loans - 45 - 45 - 103 - 103 Corporate equity 38,825 - - 38,825 40,155 2 - 40,157

58,770 29,853 584 89,207 62,556 22,802 545 85,903

FVTPL Securities Issued or guaranteed by:

Canadian federal government 627 108 - 735 410 107 - 517 Canadian provincial and municipal governments 239 1,231 - 1,470 364 915 - 1,279 U.S. federal government 9 35 - 44 - 48 - 48 Other governments - 95 - 95 - 49 - 49

NHA MBS, U.S. agency MBS and CMO - 3 - 3 - 5 - 5 Corporate debt 97 8,140 - 8,237 146 8,071 - 8,217 Corporate equity 1,654 8 1,807 3,469 1,536 69 1,984 3,589

2,626 9,620 1,807 14,053 2,456 9,264 1,984 13,704

FVOCI Securities Issued or guaranteed by:

Canadian federal government 21,492 6,090 - 27,582 11,168 776 - 11,944 Canadian provincial and municipal governments 1,944 2,781 - 4,725 3,798 2,214 - 6,012 U.S. federal government 17,046 1,633 - 18,679 15,068 907 - 15,975 U.S. states, municipalities and agencies 6 5,356 1 5,363 1 4,159 1 4,161 Other governments 2,748 4,402 - 7,150 4,396 2,939 - 7,335

NHA MBS, U.S. agency MBS and CMO - 11,538 - 11,538 - 14,000 - 14,000 Corporate debt 590 2,779 - 3,369 2,205 2,802 - 5,007 Corporate equity - - 87 87 - - 81 81

43,826 34,579 88 78,493 36,636 27,797 82 64,515

Business and government loans - 1,409 2,203 3,612 - 442 1,736 2,178

Fair Value Liabilities Securities sold but not yet purchased 25,323 5,256 - 30,579 22,393 3,860 - 26,253 Structured note liabilities and other note liabilities (1) - 17,467 - 17,467 - 15,829 - 15,829 Annuity liabilities (2) - 1,232 - 1,232 - 1,043 - 1,043

25,323 23,955 - 49,278 22,393 20,732 - 43,125

Derivative Assets Interest rate contracts 24 17,333 - 17,357 14 10,443 - 10,457 Foreign exchange contracts 9 15,804 - 15,813 7 9,262 - 9,269 Commodity contracts 457 1,555 - 2,012 329 817 - 1,146 Equity contracts 743 2,860 - 3,603 226 997 - 1,223 Credit default swaps - 11 - 11 - 49 - 49

1,233 37,563 - 38,796 576 21,568 - 22,144

Derivative Liabilities Interest rate contracts 31 12,836 - 12,867 11 7,943 - 7,954 Foreign exchange contracts 12 18,723 - 18,735 20 10,843 - 10,863 Commodity contracts 603 2,247 - 2,850 218 1,462 - 1,680 Equity contracts 478 4,907 - 5,385 103 2,896 - 2,999 Credit default swaps - 19 3 22 - 101 1 102

1,124 38,732 3 39,859 352 23,245 1 23,598

(1) These structured note liabilities and other note liabilities included in deposits have been designated at FVTPL. (2) These investment contract liabilities in our insurance business have been designated at FVTPL.


Quantitative Information about Level 3 Fair Value Measurements The table below presents the fair values of our significant Level 3 financial instruments that are measured at a fair value on a recurring basis, the valuation techniques used to determine their fair values and the value ranges of significant unobservable inputs used in the valuations. We have not

applied any other reasonably possible alternative assumption to the significant Level 3 categories of private equity investments, as the net asset values are provided by the investment or fund managers.

Range of input values (1)

As at July 31, 2020 Reporting line in fair Fair value Significant (Canadian $ in millions, except as noted) value hierarchy table of assets Valuation techniques unobservable inputs Low High

Private equity (2) Corporate equity 1,807 Net Asset Value Net Asset Value na na EV/EBITDA Multiple 5x 16x Loans (3) Business and government loans 2,203 Discounted cash flows Discount margin 56bps 224bps NHA MBS and U.S. agency MBS and CMO NHA MBS and U.S. agency MBS and CMO 584 Discounted cash flows Prepayment rate 7% 86%

Market Comparable Comparability Adjustment (4) (5.26) 5.54

(1) The low and high input values represent the highest and lowest actual level of inputs used to value a group of financial instruments in a particular product category. These input ranges do not reflect

the level of input uncertainty, but are affected by the specific underlying instruments within each product category. The input ranges will therefore vary from period to period based on the

characteristics of the underlying instruments held at each balance sheet date.

(2) Included in private equity is $490 million of Federal Reserve Bank and U.S. Federal Home Loan Bank shares that we carry at cost, which approximates fair value, and hold to meet regulatory requirements.

(3) The impact of assuming a 10 basis point increase or decrease in discount margin for business and government loans is $2 million.

(4) Range of input values represents price per security adjustment.

na - not applicable

Significant Transfers Our policy is to record transfers of assets and liabilities between fair value hierarchy levels at their fair values as at the end of each reporting period, consistent with the date of the determination of fair value. Transfers between the various fair value hierarchy levels reflect changes in the availability

of quoted market prices or observable market inputs that result from changes in market conditions. Transfers from Level 1 to Level 2 were due to reduced observability of the inputs used to value the securities. Transfers from Level 2 to Level 1 were due to increased availability of quoted prices in

active markets. The following table presents significant transfers between Level 1 and Level 2 for the three and nine months ended July 31, 2020 and July 31, 2019.


For the three months ended July 31, 2020 July 31, 2019

Level 1 to Level 2 Level 2 to Level 1 Level 1 to Level 2 Level 2 to Level 1

Trading Securities 994 2,682 1,734 901 FVTPL Securities 19 241 218 38 FVOCI Securities 1,768 4,294 1,834 2,335

Securities sold but not yet purchased 681 2,067 6,362 98


For the nine months ended July 31, 2020 July 31, 2019

Level 1 to Level 2 Level 2 to Level 1 Level 1 to Level 2 Level 2 to Level 1

Trading Securities 5,761 3,952 5,392 4,260 FVTPL Securities 518 302 682 390 FVOCI Securities 9,032 7,012 9,723 3,910 Securities sold but not yet purchased 4,432 2,982 9,905 2,501


Changes in Level 3 Fair Value Measurements The table below presents a reconciliation of all changes in Level 3 financial instruments during the three and nine months ended July 31, 2020, including realized and unrealized gains (losses) included in earnings and other comprehensive income as well as transfers into and out of Level 3.

Transfers from Level 2 into Level 3 were due to an increase in unobservable market inputs used in pricing the securities. Transfers out of Level 3 into Level 2 were due to an increase in observable market inputs used in pricing the securities.

Change in fair value Change in unrealized gains Included (losses) recorded Balance in other Transfers Transfers Fair Value in income (Canadian $ in millions) April 30, Included in comprehensive Issuances/ Maturities/ into out of as at July for instruments

For the three months ended July 31, 2020 2020 earnings income (1) Purchases Sales (2) Settlement Level 3 Level 3 31, 2020 still held (3)

Trading Securities NHA MBS and U.S. agency MBS

and CMO 487 (115) (18) 362 (151) - 41 (22) 584 (74) Corporate debt 48 10 (2) - (56) - - - - -

Total trading securities 535 (105) (20) 362 (207) - 41 (22) 584 (74)

FVTPL Securities Corporate equity 2,062 (23) (57) 58 (233) - - - 1,807 2

Total FVTPL securities 2,062 (23) (57) 58 (233) - - - 1,807 2


U.S. states, municipalities and agencies 1 - - - - - - - 1 na

Corporate equity 83 - - 4 - - - - 87 na

Total FVOCI securities 84 - - 4 - - - - 88 na

Business and government loans 2,028 - 95 765 - (685) - - 2,203 -

Fair Value Liabilities Securities sold but not yet purchased - - - - - - - - - - Total fair value liabilities - - - - - - - - - -

Derivative Liabilities Equity contracts - - - - - - - - - - Credit default swaps 4 - - - - - - (1) 3 -

Total derivative liabilities 4 - - - - - - (1) 3 -

(1) Foreign exchange translation on trading securities held by foreign subsidiaries is included in other comprehensive income, net foreign operations. (2) Includes proceeds recovered on securities sold but not yet purchased.

(3) Changes in unrealized gains (losses) on Trading and FVTPL securities still held on July 31, 2020 are included in earnings for the period.

Unrealized gains (losses) recognized on Level 3 financial instruments may be offset by related (losses) gains on hedge contracts.

na – Not applicable

Change in fair value Change in unrealized gains Included in (losses) recorded

Balance other Transfers Transfers Fair Value in income (Canadian $ in millions) October 31, Included in comprehensive Issuances/ Maturities/ into out of as at July for instruments

For the nine months ended July 31, 2020 2019 earnings income (1) Purchases Sales (2) Settlement Level 3 Level 3 31, 2020 still held (3)


and CMO 538 (245) 12 811 (540) - 202 (194) 584 (158) Corporate debt 7 10 (2) 50 (68) - 3 - - (1)

Total trading securities 545 (235) 10 861 (608) - 205 (194) 584 (159)

FVTPL Securities Corporate equity 1,984 (27) 23 244 (418) - 1 - 1,807 7

Total FVTPL 1,984 (27) 23 244 (418) - 1 - 1,807 7


U.S. states, municipalities and agencies 1 - - - - - - - 1 na



Business and government loans 1,736 (3) 183 1,705 - (1,418) - - 2,203 -

Fair Value Liabilities Securities sold but not yet purchased - - - - - - - - - - Total fair value liabilities - - - - - - - - - -

Derivative Liabilities Equity contracts - - - - - - - - - - Credit default swaps 1 - - - - - 3 (1) 3 -

Total derivative liabilities 1 - - - - - 3 (1) 3 -

(1) Foreign exchange translation on trading securities held by foreign subsidiaries is included in other comprehensive income, net foreign operations.

(2) Includes proceeds recovered on securities sold but not yet purchased.





The table below presents a reconciliation of all changes in Level 3 financial instruments during the three and nine months ended July 31, 2019, including realized and unrealized gains (losses) included in earnings and other comprehensive income.

Change in fair value Change in unrealized gains

Included in (losses) recorded

Balance other Transfers Transfers Fair Value as in income

(Canadian $ in millions) April 30, Included in comprehensive Issuances/ Maturities/ into out of at July 31, for instruments

For the three months ended July 31, 2019 2019 earnings income (1) Purchases Sales (2) Settlement Level 3 Level 3 2019 still held (3)


and CMO 215 (15) (3) 97 (96) - 53 (5) 246 (6)

Corporate debt 7 - - 26 (6) - - (1) 26 -

Total trading securities 222 (15) (3) 123 (102) - 53 (6) 272 (6)

FVTPL Securities

Corporate equity 1,907 10 (21) 77 (66) (1) - - 1,906 16

Total FVTPL 1,907 10 (21) 77 (66) (1) - - 1,906 16


U.S. states, municipalities and

agencies 1 - - - - - - - 1 na



Business and government loans 2,172 - (31) 155 - (132) - - 2,164 -

Fair Value Liabilities

Securities sold but not yet purchased - - - - 172 - - - 172 -

Total fair value liabilities - - - - 172 - - - 172 -

Derivative Liabilities Equity contracts - - - - - - - - - -

Credit default swaps - - - - - - 1 - 1 -

Total derivative liabilities - - - - - - 1 - 1 -

(1) Foreign exchange translation on trading securities held by foreign subsidiaries is included in other comprehensive income, net foreign operations.

(2) Includes proceeds recovered on securities sold but not yet purchased.




Change in fair value Change in unrealized gains

Included in (losses) recorded

Balance other Transfers Transfers Fair Value as in income

(Canadian $ in millions) October 31, Included in comprehensive Issuances/ Maturities/ into out of at July 31, for instruments

For the nine months ended July 31, 2019 2018 earnings income (1) Purchases Sales (2) Settlement Level 3 Level 3 2019 still held (3)


and CMO 255 (22) 1 280 (326) - 98 (40) 246 (13)

Corporate debt 7 - - 32 (12) - - (1) 26 -

Total trading securities 262 (22) 1 312 (338) - 98 (41) 272 (13)

FVTPL Securities

Corporate equity 1,825 20 2 324 (264) (1) - - 1,906 36

Total FVTPL 1,825 20 2 324 (264) (1) - - 1,906 36


U.S. states, municipalities and

agencies 1 - - - - - - - 1 na



Business and government loans 1,450 7 13 1,369 - (675) - - 2,164 -

Fair Value Liabilities

Securities sold but not yet purchased - - - (7) 179 - - - 172 -

Total fair value liabilities - - - (7) 179 - - - 172 -

Derivative Liabilities Equity contracts 1 - - - - - - (1) - -

Credit default swaps 1 - - - - - 1 (1) 1 -

Total derivative liabilities 2 - - - - - 1 (2) 1 -

(1) Foreign exchange translation on trading securities held by foreign subsidiaries is included in other comprehensive income, net foreign operations. (2) Includes proceeds recovered on securities sold but not yet purchased.





Note 8: Capital Management Our objective is to maintain a strong capital position in a cost-effective structure that: is appropriate given our target regulatory capital ratios and

internal assessment of required economic capital; underpins our operating groups’ business strategies; supports depositor, investor and regulator confidence, while building long-term shareholder value; and is consistent with our target credit ratings.

As at July 31, 2020, we met OSFI’s target capital ratio requirements, which include a 2.5% Capital Conservation Buffer, a 1.0% Common Equity Surcharge for Domestic Systemically Important Banks (“D-SIBs”), a Countercyclical Buffer and a 1.0% Domestic Stability Buffer applicable to

D-SIBs. Our capital position as at July 31, 2020 is detailed in the Capital Management section on pages 15 through 18 of our interim Management’s Discussion and Analysis.

Note 9: Employee Compensation Stock Options We did not grant any stock options during the three months ended July 31, 2020 and 2019. During the nine months ended July 31, 2020, we granted a

total of 976,087 stock options (931,047 stock options during the nine months ended July 31, 2019). The weighted-average fair value of options granted during the nine months ended July 31, 2020 was $9.46 per option ($10.23 per option for the nine months ended July 31, 2019).

To determine the fair value of the stock option tranches (i.e. the portion that vests each year) on the grant date, the following ranges of values were used for each option pricing assumption:

For stock options granted during the nine months ended July 31, 2020 July 31, 2019

Expected dividend yield 4.3% 5.7% Expected share price volatility 15.4% 20.0% - 20.1% Risk-free rate of return 1.9% - 2.0% 2.5% Expected period until exercise (in years) 6.5 - 7.0 6.5 - 7.0 Exercise price ($) 101.47 89.90

Changes to the input assumptions can result in different fair value estimates.

Pension and Other Employee Future Benefit Expenses Pension and other employee future benefit expenses are determined as follows:

(Canadian $ in millions) Pension benefit plans Other employee future benefit plans

For the three months ended July 31, 2020 July 31, 2019 July 31, 2020 July 31, 2019

Current service cost 62 48 2 2 Net interest (income) expense on net defined benefit (asset) liability 1 (5) 8 10 Administrative expenses 1 1 - - Benefits expense 64 44 10 12 Canada and Quebec pension plan expense 22 23 - - Defined contribution expense 37 37 - - Total pension and other employee future benefit expenses

recognized in the Consolidated Statement of Income 123 104 10 12

(Canadian $ in millions) Pension benefit plans Other employee future benefit plans

For the nine months ended July 31, 2020 July 31, 2019 July 31, 2020 July 31, 2019

Current service cost 187 144 8 7 Net interest (income) expense on net defined benefit (asset) liability 1 (14) 24 29 Past service income - (5) - - Administrative expenses 3 3 - - Benefits expense 191 128 32 36 Canada and Quebec pension plan expense 75 70 - - Defined contribution expense 135 127 - - Total pension and other employee future benefit expenses

recognized in the Consolidated Statement of Income 401 325 32 36


Note 10: Earnings Per Share Basic earnings per share is calculated by dividing net income attributable to equity holders of the bank, after deducting dividends on preferred shares

and distributions payable on other equity instruments, by the daily average number of fully paid common shares outstanding throughout the period. Diluted earnings per share is calculated in the same manner, with further adjustments made to reflect the dilutive impact of instruments

convertible into our common shares. The following tables present our basic and diluted earnings per share:

Basic Earnings Per Common Share (Canadian $ in millions, except as noted) For the three months ended For the nine months ended

July 31, 2020 July 31, 2019 July 31, 2020 July 31, 2019

Net income attributable to equity holders of the bank 1,232 1,557 3,513 4,564 Dividends on preferred shares and distributions payable on other equity instruments (73) (59) (195) (159)

Net income available to common shareholders 1,159 1,498 3,318 4,405

Weighted-average number of common shares outstanding (in thousands) 641,300 638,900 640,129 638,803

Basic earnings per share (Canadian $) 1.81 2.34 5.18 6.90

Diluted Earnings Per Common Share

Net income available to common shareholders adjusted for impact of dilutive

1,159 1,498 3,318 4,405 Weighted-average number of common shares outstanding (in thousands) 641,300 638,900 640,129 638,803 Effect of dilutive instruments

Stock options potentially exercisable (1) 2,400 5,734 3,473 5,697 Common shares potentially repurchased (2,046) (4,184) (2,721) (4,137)

Weighted-average number of diluted common shares outstanding (in thousands) 641,654 640,450 640,881 640,363

Diluted earnings per share (Canadian $) 1.81 2.34 5.18 6.88

(1) In computing diluted earnings per share we excluded average stock options outstanding of 4,238,334 and 3,124,912 with a weighted-average exercise price of $94.30 and $99.72, respectively, for the three and nine months ended July 31, 2020 (687,059 and 908,194 with a weighted-average exercise price of $104.14 and $102.98, respectively, for the three and nine months ended July 31, 2019) as the average share

price for the period did not exceed the exercise price.

Note 11: Income Taxes The Canada Revenue Agency (“CRA”) has reassessed us for additional income tax and interest in an amount of approximately $941 million, to date, in

respect of certain 2011-2015 Canadian corporate dividends. In its reassessments, the CRA denied dividend deductions on the basis that the dividends were received as part of a “dividend rental arrangement”. The tax rules raised by the CRA were prospectively addressed in the 2015 and 2018 Canadian Federal Budgets. In the future, we expect to be reassessed for significant income tax for similar activities in subsequent years. We remain of

the view that our tax filing positions were appropriate and intend to challenge all reassessments.

Note 12: Operating Segmentation Operating Groups We conduct our business through three operating groups, each of which has a distinct mandate. Our operating groups are Personal and Commercial Banking (“P&C”) (comprised of Canadian Personal and Commercial Banking (“Canadian P&C”) and U.S. Personal and Commercial Banking (“U.S. P&C”)),

BMO Wealth Management and BMO Capital Markets (“BMO CM”), along with a Corporate Services unit. For additional information refer to Note 25 of our annual consolidated financial statements for the year ended October 31, 2019 on pages 199 to

202 of the Annual Report.


Our results and average assets, grouped by operating segment, are as follows: (Canadian $ in millions) Canadian BMO Wealth Corporate For the three months ended July 31, 2020 P&C U.S. P&C Management BMO CM Services (1) Total

Net interest income (2) 1,509 1,107 229 952 (262) 3,535 Non-interest revenue 453 292 2,255 576 78 3,654 Total Revenue 1,962 1,399 2,484 1,528 (184) 7,189 Provision for credit losses on impaired loans 257 109 1 79 - 446 Provision for credit losses on performing loans 313 223 7 58 7 608 Total Provision for credit losses 570 332 8 137 7 1,054 Insurance claims, commissions and changes in policy benefit liabilities - - 1,189 - - 1,189 Depreciation and amortization 117 131 93 59 - 400 Other non-interest expense 843 621 744 766 70 3,044 Income (loss) before taxes 432 315 450 566 (261) 1,502 Provision for (recovery of) income taxes 112 52 109 140 (143) 270

Reported net income (loss) 320 263 341 426 (118) 1,232

Average Assets 252,028 140,615 46,308 379,131 159,682 977,764 Canadian BMO Wealth Corporate For the three months ended July 31, 2019 P&C U.S. P&C Management BMO CM Services (1) Total

Net interest income (2) 1,500 1,066 237 537 (123) 3,217 Non-interest revenue 543 298 1,876 670 62 3,449 Total Revenue 2,043 1,364 2,113 1,207 (61) 6,666 Provision for credit losses on impaired loans 174 61 - 7 1 243 Provision for (recovery of) credit losses on performing loans 30 37 (2) 3 (5) 63 Provision for (recovery of) credit losses 204 98 (2) 10 (4) 306 Insurance claims, commissions and changes in policy benefit liabilities - - 887 - - 887 Depreciation and amortization 87 111 68 35 - 301 Other non-interest expense 874 693 817 764 42 3,190 Income (loss) before taxes 878 462 343 398 (99) 1,982 Provision for (recovery of) income taxes 228 94 93 84 (74) 425

Reported net income (loss) 650 368 250 314 (25) 1,557

Average Assets 239,948 129,098 41,891 343,292 82,734 836,963

(Canadian $ in millions) Canadian BMO Wealth Corporate For the nine months ended July 31, 2020 P&C U.S. P&C Management BMO CM Services (1) Total

Net interest income 4,561 3,287 672 2,503 (582) 10,441 Non-interest revenue 1,443 912 4,727 1,445 232 8,759 Total Revenue 6,004 4,199 5,399 3,948 (350) 19,200 Provision for credit losses on impaired loans 607 365 4 205 2 1,183 Provision for credit losses on performing loans 612 315 13 390 8 1,338 Total Provision for credit losses 1,219 680 17 595 10 2,521 Insurance claims, commissions and changes in policy benefit liabilities - - 1,708 - - 1,708 Depreciation and amortization 373 417 250 171 - 1,211 Non-interest expense 2,549 1,913 2,387 2,264 305 9,418 Income (loss) before taxes 1,863 1,189 1,037 918 (665) 4,342 Provision for (recovery of) income taxes 482 236 261 210 (360) 829

Reported net income (loss) 1,381 953 776 708 (305) 3,513

Average Assets 251,325 139,196 45,234 370,363 129,399 935,517 Canadian BMO Wealth Corporate For the nine months ended July 31, 2019 P&C U.S. P&C Management BMO CM Services (1) Total

Net interest income 4,342 3,160 699 1,695 (372) 9,524 Non-interest revenue 1,564 858 5,396 1,885 169 9,872 Total Revenue 5,906 4,018 6,095 3,580 (203) 19,396 Provision for (recovery of) credit losses on impaired loans 410 94 1 20 (5) 520 Provision for (recovery of) credit losses on performing loans 52 33 (1) 20 (5) 99 Provision for (recovery of) credit losses 462 127 - 40 (10) 619 Insurance claims, commissions and changes in policy benefit liabilities - - 2,374 - - 2,374 Depreciation and amortization 250 338 200 107 - 895 Non-interest expense 2,610 2,008 2,463 2,380 287 9,748 Income (loss) before taxes 2,584 1,545 1,058 1,053 (480) 5,760 Provision for (recovery of) income taxes 670 327 265 233 (299) 1,196

Reported net income (loss) 1,914 1,218 793 820 (181) 4,564

Average Assets 235,562 124,590 40,345 342,829 82,778 826,104

(1) Corporate Services includes Technology and Operations. (2) Operating groups report on a taxable equivalent basis (“teb”). Revenue and the provision for income taxes are increased on tax-exempt securities to an equivalent before-tax basis to facilitate comparisons of

income between taxable and tax-exempt sources. The offset to the groups’ teb adjustments is reflected in Corporate Services revenue and provision for income taxes.



Note 13: Legal Proceedings The bank and its subsidiaries are party to legal proceedings, including regulatory investigations, in the ordinary course of business. Last quarter, an

Ontario court made a liability finding and awarded an accounting of profits in a class action involving BMO Nesbitt Burns Inc., BMO InvestorLine Inc. and BMO Trust Company regarding disclosures of foreign exchange conversion spreads when converting foreign exchange in registered accounts. The

monetary award will be determined at a court hearing in Q1 2021 based on profits earned during the class period, less reasonable expenses, plus pre-judgment interest. The lawsuit claimed monetary awards up to $419 million (at May 2019). We have appealed the decision. The Plaintiffs have also

appealed. An appropriate provision is in place. While there is inherent difficulty in predicting the ultimate outcome of this or other proceedings, management does not expect the outcome of any

of these proceedings, individually or in the aggregate, to have a material adverse effect on the consolidated financial position or the results of operations of the bank.

Note 14: Acquisition On April 6, 2020, we completed the acquisition of Clearpool Group Inc. (“Clearpool”), a New York-based provider of electronic trading solutions, operating in the United States and Canada, for cash consideration of US$139 million (CAD$196 million) plus contingent consideration of approximately

US$8 million (CAD$11 million) based on meeting certain revenue targets over four years. The acquisition was accounted for as a business combination, and the acquired business and corresponding goodwill are included in our Capital Markets reporting segment.

As part of this acquisition, we acquired intangible assets of $85 million and goodwill of $138 million. The intangible assets are being amortized over three to twelve years. Goodwill related to this acquisition is not deductible for tax purposes.

The fair values of the assets acquired and liabilities assumed at the date of acquisition are as follows: (Canadian $ in millions)

Clearpool

Goodwill and intangible assets 223 Other assets 44

Total assets 267

Liabilities 60

Purchase price 207

The purchase price allocation for Clearpool is subject to refinement as we complete the valuation of the assets acquired and liabilities assumed.

INVESTOR AND MEDIA PRESENTATION

Investor Presentation Materials Interested parties are invited to visit our website at www.bmo.com/investorrelations to review our 2019 annual MD&A and audited annual

consolidated financial statements, quarterly presentation materials and supplementary financial information package.

Quarterly Conference Call and Webcast Presentations Interested parties are also invited to listen to our quarterly conference call on Tuesday, August 25, 2020, at 7.15 a.m. (ET). The call may be accessed by

telephone at 416-340-2217 (from within Toronto) or 1-800-806-5484 (toll-free outside Toronto), entering Passcode: 6163481#. A replay of the

conference call can be accessed until Wednesday, September 23, 2020, by calling 905-694-9451 (from within Toronto) or 1-800-408-3053 (toll-free

outside Toronto) and entering Passcode: 8932373#.

A live webcast of the call can be accessed on our website at www.bmo.com/investorrelations. A replay can also be accessed on the website.

Media Relations Contacts Paul Gammal, Toronto, [email protected], 416-867-6543

Investor Relations Contacts Jill Homenuk, Head, Investor, Media & Government Relations, [email protected], 416-867-4770

Bill Anderson, Director, Investor Relations, [email protected], 416-867-7834

Shareholder Dividend Reinvestment and Share Purchase Plan (the Plan) Average market price as defined under the Plan May 2020: $65.23 June 2020: $73.17 July 2020: $74.47

For dividend information, change in shareholder address or to advise of duplicate mailings, please contact Computershare Trust Company of Canada 100 University Avenue, 8th Floor Toronto, Ontario M5J 2Y1 Telephone: 1-800-340-5021 (Canada and the United States) Telephone: (514) 982-7800 (international) Fax: 1-888-453-0330 (Canada and the United States) Fax: (416) 263-9394 (international) E-mail: [email protected]

For other shareholder information, please contact Bank of Montreal Shareholder Services Corporate Secretary’s Department One First Canadian Place, 21st Floor Toronto, Ontario M5X 1A1 Telephone: (416) 867-6785 Fax: (416) 867-6793 E-mail: [email protected]

For further information on this document, please contact Bank of Montreal Investor Relations Department P.O. Box 1, One First Canadian Place, 10th Floor Toronto, Ontario M5X 1A1

To review financial results and regulatory filings and disclosures online, please visit our website at www.bmo.com/investorrelations.

Our 2019 Annual MD&A, audited annual consolidated financial statements, annual information form and annual report on Form 40-F (filed with the

U.S. Securities and Exchange Commission) are available online at www.bmo.com/investorrelations and at www.sedar.com. Printed copies of the

bank’s complete 2019 audited financial statements are available free of charge upon request at 416-867-6785 or [email protected].

30BAnnual Meeting 2021 The next Annual Meeting of Shareholders will be held on Wednesday, April 7, 2021, in Toronto, Ontario.

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